Manufacturing Output And Orders Ease, But Investment Intentions Recover – CBI/Accenture Quarterly Industrial Trends Survey
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Stephen Rippengill, Managing Director at Accenture, Leeds, said:
“It is clear from the survey that the manufacturing sector is still facing difficult times as costs and prices continue to rise, but there are real positives to take.
“Yorkshire and the Humber has a rich manufacturing history, and the predicted growth in employment is an incredibly encouraging sign that businesses are investing in people. Investing in people, technology and innovation will be a key contributor to driving the sector forward and unlocking future growth for our region.”
Growth in manufacturing output and orders eased in the quarter to July, slowing to more typical rates of expansion following a period of exceptionally strong growth over the previous year. Average costs and prices continued to rise sharply, although growth eased from recent highs.
Optimism within the sector fell for a third consecutive quarter. However, investment intentions generally improved, and employment within the sector continued to grow at a robust pace, though less quickly than expected last quarter (for the third quarter running). Concerns over shortages of labour and shortages of components and materials remained acute, but off their recent highs.
The survey, based on the responses of 237 manufacturing firms, found:
Business sentiment fell for a third consecutive quarter, but at a slower pace than in April (-21% from -34% in the quarter to April).
Output volumes in the quarter to July grew at the slowest pace since the quarter to April 2021 (balance of +6%, compared with +25% in quarter to June and a long-run average of +4%), with a similar rate of growth expected in the three months to October (+6%). Output rose in 10 out of 17 sub-sectors, with headline growth driven by food, drink & tobacco, and aerospace.
Average costs in the quarter to July increased at a slightly slower pace compared with the previous quarter, but growth remained well above average (+82%, compared with +87% in April and a long-run average of +31%). Cost growth is expected to slow a little further in the quarter to October (+77%).
Domestic price growth in the quarter to July also eased slightly (+51%, from +60% in April; the long-run average is +13%). Prices are expected to rise at a similar pace to the last quarter (+48%) in the quarter ahead.
Investment intentions for the year ahead picked up in comparison to April for plant & machinery (+17% from +9%), product & process innovation (+10% from +1%) and training (+10% from -3%). Investment in buildings is expected to fall slightly over the year ahead (-7% from -6%, though this remains above the long-run average of -17%).
Numbers employed grew at a similar rate to the previous quarter (+18% from +21%), with a similar rate of increase expected in the next three months (+19%).
Anna Leach, CBI Deputy Chief Economist, said:
“The manufacturing sector has been an economic bright spot in recent months, but output and orders have softened amid ongoing cost pressures, supply challenges and a generalised weakening in economic conditions both in the UK and globally.
“It is encouraging, however, to see investment intentions firming. Stronger investment will be vital if the UK is to reinvigorate growth and keep recession at bay. The new prime minister will need act quickly to fan the flames of these ambitions by announcing a permanent successor to the Super Deduction and urgently reforming an outdated business rates system that currently acts as a tax on investment.”