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Manufacturing output holds steady despite orders drop

Manufacturing output was stable over the past quarter, despite orders falling due to weaker demand for exports.

The latest Industrial Trends Survey from the Confederation of British Industry found that 21 per cent of 472 manufacturers saw an increase in orders, while 25 per cent reported a decline.

The balance of domestic orders was almost unchanged from the previous quarter at minus two per cent, but the balance for export orders fell from minus two per cent in January to minus seven per cent. The number of firms citing political/economic conditions abroad as a constraint on export orders in the coming three months rose slightly from 25 per cent to 31 per cent.

Nevertheless, the balance for overall output remained in positive territory. Twenty-four per cent of businesses reported a rise in output volumes, while 23 per cent said they had declined.

Employment growth was also stronger. Twenty-five per cent of firms said their workforce had grown in the past three months, while 21 per cent said headcount was down - the balance of five per cent was well above the long-run average of minus nine per cent.

Manufacturers' investment intentions compared with the previous 12 months improved for buildings (six per cent), plant and machinery (17 per cent) and product and process innovation (18 per cent). They fell from the previous quarter, however, for training and retraining (19 per cent, down from 24 per cent in January).

Fourteen per cent of firms said they were more optimistic about the general business situation than three months ago, and 19 per cent were less optimistic, giving a rounded balance of minus five per cent. This was nearly unchanged from the previous quarter.

Looking to the coming quarter, 27 per cent of manufacturers expected new orders to increase and 13 per cent predicted they would fall, giving a balance of 14 per cent - well above the average of five per cent.

A balance of 12 per cent forecast an increase in domestic orders, while 20 per cent think export orders will increase - the highest figure since July 2014.

Meanwhile, a balance of 17 per cent believe output will rise, the highest reading since October 2014.

Rain Newton-Smith, CBI director of economics, said: "Manufacturing has yet to pick-up after a flat start to the year, with falling orders providing little impetus for production. While expectations for the upcoming quarter are encouraging, manufacturers are still facing sizeable external headwinds.

"The falling exchange rate should give some support to manufacturers, and investment intentions are strong. With the expected pick-up in exports, it's likely that firms will be looking to increase capacity.

"We need to continue to help manufacturers to export their products to markets across the globe. While businesses should take the lead, Government also has a role to play through the advice provided by UKTI and our embassies."

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