Growth in manufacturing output eased last month, a closely-watched survey showed on Tuesday, while price expectations fell to a nine-month low.
The CBI Industry Trends Survey’s output growth balance was +25 for the three months to June, compared to +30 in May. Growth was also expected to ease further over the next three months, with a balance of +20, although it remains above the long-run average of +9.
Total order books also softened, to +18 from May’s +26 and below consensus for +22. Export orders also weakened.
However, expected domestic price growth for the three months ahead eased markedly, to a nine-month low of +58 from +75 in May and the survey high of +80 in March.
Anna Leach, deputy chief economist at the Confederation of British Industry, said: “While manufacturing output is still being supported by a backlog of orders, growth appears to be softening. Stocks of finished goods are now seen as broadly adequate and we may be seeing the first signs that weaker activity is beginning to slow the pace of price increases in the sector.
“Manufacturers continue to report a range of challenges, including significant cost pressures, shipping delays, shortages of key inputs and recruitment difficulties. All of these trends are weighing on confidence.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The fall in the net balance of manufacturers planning to increase prices is an encouraging sign that the rate of increase in consumer goods prices is about to slow, and will ensure that the headline rate of consumer price inflation peaks later this year below the 11% rate currently forecast by the Monetary Policy Committee.
“Producers appear to be accepting a squeeze on their margins now that growth in demand has slowed, and stocks of finished goods are reported by a slight majority to be more than adequate to meet demand.
“All told, the combination of flatlining demand and slowing price growth in the sector should reassure the MPC that it can stick to 25 basis point hikes at its two meetings in the third quarter, rather than up the ante.”
Overall, output increased in 12 of the 17 sectors the survey tracks in the three months to June. Motor vehicles and aerospace were the biggest contributors to the headline balance, while food, drink and tobacco made a negative contribution for the first time in just over a year.
The CBI Industrial Trends survey was conducted between 25 May and 13 June and received 212 responses.
