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Manufacturing & Supply Chain

UK manufacturing output volumes fall at the fastest pace in over two years, while selling price inflation remains high

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UK manufacturing output volumes fall at the fastest pace in over two years, while selling price inflation remains high

UK manufacturing output volumes fall at the fastest pace in over two years, while selling price inflation remains high
December 28
10:41 2022
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UK manufacturers reported a fall in output volumes in the three months to December, at the fastest pace since the three months to September 2020, according to the CBI’s latest Industrial Trends Survey. This fall was largely driven by the food, drink & tobacco, paper, printing & media, and mechanical engineering sectors.

The survey found that selling price inflation is expected to accelerate slightly in the next three months (though below the record high reached earlier this year). Total order books as well as export order books were reported as below normal, while stocks of finished goods were seen as adequate.

The survey, based on the responses of 220 manufacturing firms, found:

  • Manufacturing output volumes fell in the three months to December (weighted balance of -9%, from +18% in the three months to November), and at the fastest pace since September 2020. Output is expected to fall at a similar pace in the three months to March (-10%).
    • Output fell in 11 out of 17 sectors in the three months to December. The decrease in overall output reported this quarter was driven by the food, drink & tobacco; paper, printing & media; and mechanical engineering sectors.
  • Total order books were reported as below “normal” in December, to a similar extent as in November (-6% from -5%). However, the balance remains above the long-run average (-13%). Export order books were also seen as below normal and to a greater extent than last month (-19% from -7%). This was broadly in line with the long-run average (-18%).
  • Average selling price inflation is expected to accelerate slightly in the next three months (+52%, from +47%). Although expectations for selling price inflation were comfortably below the multi-decade high seen earlier in the year (+80% in March), they remained well above the long-run average (+6%).
  • Stocks of finished goods were seen as adequate in December, with the balance rising slightly compared to November (+7% from +5%).

Anna Leach, CBI Deputy Chief Economist, said: “The corrosive effect of higher inflation on demand is increasingly clear, as manufacturing output contracting at the fastest pace in two years over the last quarter. While some global price pressures have eased in recent months, cost and price inflation will likely remain very high in the near term, with rising energy bills a key concern for manufacturers.

“Government support for energy costs has been considerable already, buying time for businesses to adapt to Europe’s new energy landscape. And with the UK economy set to be in recession through much of 2023, there remains a strong case for further support in the coming year.”

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