UK factory growth falls for first time since February, CBI says

by | Aug 23, 2022

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UK factory output shrank for the first time in over a year over the three months to August, alongside a larger-than-expected decline in total order books, the results of a closely-followed survey revealed.
The Confederation of British Industry’s Industrial Trends survey revealed a drop in the output balance from +6% for the three months to July to -7% now – marking the first fall since February 2021.

“From rising prices to bottlenecks in supply chains, manufacturers continue to operate against a background of high input costs and significant operational delays,” said CBI lead economist Alpesh Paleja.

“When coupled with an oncoming economic downturn, it’s not surprising to see orders and activity ebb away as we move through the year.”

Slower headline growth was driven by the food, drink and tobacco, mechanical engineering and paper, printing & media sub-sectors.

In parallel, the total orders balance slipped from +8% for July to -7% in August (consensus: +2%) with survey respondents describing them as “below normal”.

Expectations for output over the following three months were that it would be “broadly flat”, “making a significant worsening of expectations from just a few months ago,” CBI said.

The sub-index tracking companies’ expectations for average selling prices on the other hand picked up from +48% to +57%, which was still well above the long-run average of +6%.

“From rising prices to bottlenecks in supply chains, manufacturers continue to operate against a background of high input costs and significant operational delays,” Paleja added.

“When coupled with an oncoming economic downturn, it’s not surprising to see orders and activity ebb away as we move through the year.”

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