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UK factory orders surge in November – CBI

UK factory orders surged in November, leaving manufacturers struggling to keep up, according to the latest survey from the Confederation of British Industry.
The monthly order book balance rose to +26% from 9% in October, marking the highest reading since the series began in April 1977 and coming in above expectations of +8%.

However, the survey also showed that manufacturers’ price expectations rose to a 44-year high. The output price expectations balance rose to +67 in November – the highest since May 1977 – from +59 in October.

CBI deputy economist Anna Leach said: “It’s good to see strong order books and output growth in the manufacturing sector holding up as we head into winter. Output growth has been steady for three months now and remains quicker than its long-run average.

“But intense supply side challenges continue to put pressure on firms’ capacity to meet demand. Alongside record order books, stock adequacy was the weakest on record in November and manufacturers are increasingly having to pass on significant cost increases to customers.

“These pressures highlight that the Government was right to establish the supply chain taskforce to address acute challenges. But with these challenges likely to persist into the new year, business is ready to work with Government to adopt a more holistic, cross-economy approach to identifying solutions which support the entire supply chain.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Admittedly, the total orders balance overstates just how much demand increased in November, because it is not seasonally adjusted and nearly always falls in October, before bouncing back in November. Nonetheless, our seasonally adjusted version of the total orders balance rose 11 points in November to reach its highest level since records begin in 1977.

“Unfortunately, the relationship between the total orders balance and the official measure of manufacturing output is quite weak, because manufacturers are asked to compare orders to ‘normal levels’, and right now manufacturers cannot fulfil all orders. Even so, manufacturing output probably still has scope to rise further in Q4, as formerly-furloughed staff are recalled and as manufacturers invest to enhance productivity. Even if orders weaken next year, perhaps as restocking demand fizzles out, production will be supported by the large work backlogs that have accumulated this year.”

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