Manufacturing activity in December remained strong in UK

The CBI Industrial Trends Survey for December reported strong manufacturing activity, which is expected to continue growing during the next three months.

Manufacturing has been growing steadily since August and was above average again in December. Motor Vehicles & Transport Equipment did exceptionally well, posting a nine-month high.

The survey of 485 manufacturing companies reported that total order books rose marginally. Even export order books, which have been comparatively weak, edged up slightly to a four-month high.

CBI Director of Economics, Rain Newton-Smith, said:

“The manufacturing sector is ending 2014 on a more upbeat note, having lost a little momentum earlier in the year. Export orders have improved, and output is expected to continue growing as we head into the New Year.”

She added, however, that the strong domestic environment is tempered by several headwinds abroad. Eurozone growth is virtually non-existent, while several emerging markets are facing a challenging time.

Rain Newton-Smith

Ms. Newton-Smith said “Firms need to look harder for opportunities to ramp up exports to high-growth sectors across the globe.”

Last 3 months: while 32% of companies reported higher volumes of output, 19% said they were down, leaving a +13% balance, which is above the historical average of +2%.

Next quarter: 31% of firms forecast growth, while 15% expect business activity to decline, leaving a +16% balance.

Total order books: twenty-five percent of manufacturing firms said their order books were above normal, versus 19% saying they were below normal, leaving a +5% positive balance. The long-run average is (minus) -16%.

Export orders: this was the only piece of information that came in with a negative balance. Sixteen percent of firms reported above-normal export order books, compared to 29% saying they were below normal, leaving a -13% balance. Which was better than the long-term historical average of -20%.

Output price inflation expectations: for the coming quarter increased to their highest level (+7%) since April 2014 (+9%).

Stock levels: 17% of companies reported higher than adequate levels, compared to 9% who said they were less than adequate, leaving a +9% balance. The long-term average is +14%.