UK Factory Outlook Strong, But Price Pressures Rising

According to the latest Industrial Trends Survey by the Confederation of British Industry, manufacturing order books improved in November, but export order books and output growth eased. The survey of 430 manufacturers revealed that total order books returned to levels seen throughout the summer and well above the long-run average.

Meanwhile, export orders were slightly down, but remained above average. Output volumes rose at a slower pace over the past three months. However, expectations for production over the coming quarter are robust, reaching their highest level since February 2015, ACRnews reported.

In the wake of sterling’s sharp depreciation, manufacturers expect to increase average selling prices over the next three months, at the fastest pace since January 2014.

Three quarters of the rise in the balance comes from the food and other sectors, with price hikes for popular household commodities. 23% of manufacturers reported total order books to be above normal, and 26% said they were below normal, giving a balance of -3%. This was above average (-15%), and similar to the balance seen through the summer. 16% of firms said their export order books were above normal, and 27% said they were below normal, giving a balance of -11%.

November’s level dropped on the previous month (-6%), but remained well above average (-19%). 28% of businesses said the volume of output over the past three months was up, and 24% said it was down, giving a balance of +4%.

  Expectations Rise

Manufacturers expect output to grow robustly in the coming quarter, with 38% predicting growth, and 15% a decline, giving a rounded balance of +24%. This is the highest since February 2015 (+25%). Average selling prices are expected to rise sharply over the next three months (+19%), and at their fastest pace since January 2014 (+20%).

CBI chief economist, Rain Newton-Smith, said: “It’s good to see manufacturers’ overall order books at healthy levels and the outlook for output growth remaining robust as we head into Christmas.

“But the weak pound is beginning to make its mark, and prices are expected to rise, especially in the food sector. On the flip side though, export orders remain above average.

“To bolster British industry, manufacturers want to see bold decisions in the Autumn Statement. A crystal clear focus is needed on infrastructure, investment and innovation from the Chancellor, so that firms are given the very best environment in which to grow, both at home and abroad.”

Newton-Smith will call on British Finance Minister Philip Hammond to show a “crystal clear focus” on infrastructure, investment and innovation when he announces the government’s first budget plans since the Brexit vote on Wednesday. So far, Britain’s economy has fared better since the Brexit vote than almost all forecasts.

The Bank of England earlier this month scrapped its plan to cut interest rates below their already record low level and said it was adopting a neutral stance on monetary policy, partly due to the expected rise in consumer prices next year.   

The monthly survey of 430 manufacturers was conducted between Oct. 26 and Nov. 11.

  $156b From Software Industry

The software industry contributes £125 billion ($156.01 billion) a year to the UK economy and supports just under 2.6 million jobs. That’s according to a new report from the BSA, a trade group representing the global software industry.

Revealed as part of a wider study into the impact of software on the EU’s economy conducted by The Economist Intelligence Unit, the figures reveal how vital Britain’s tech sector is to the country as a whole.

“Unlike traditional industry sectors, software doesn’t need an external catalyst for change—it is the catalyst,” said BSA president and CEO Victoria Espinel. “Software will continue to revolutionize how we work, communicate, plan, and create, in ways that we can only now begin to fathom.”