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Manufacturing grows at fastest since 2018, but prices are rising

24 May, 2021

Last month, the UK’s manufacturing output grew at its fastest rate since December 2018, according to the latest monthly industrial trends survey by the Confederation of British Industry (CBI). The survey of 272 manufacturers found that output expanded in 12 of 17 sub-sectors, with the growth being driven mainly by the chemicals, electronic engineering, and metal products sectors. The manufacturers expect output to accelerate further in the coming three months.

But stock levels were at their lowest since July 2017, and the manufacturers expect prices to increase rapidly in the coming quarter.

Total order books also improved to their strongest since December 2017, and were “above normal” for the first time since February 2019. Export order books were broadly unchanged from April.

“Manufacturing activity rebounded this month, with strong improvements seen across total order books and output volumes,” says the CBI’s deputy chief economist, Anna Leach. “But firms are still feeling the chill as supply shortages fuel cost pressures, reflected in expectations for strong output price inflation in the coming quarter.

“Continued progress on the government’s reopening roadmap is hugely welcome, and gives cause for optimism,” she adds. “But manufacturers need clarity on future social distancing requirements and the future of workplace testing to smooth the route to recovery. This will also go some way to easing supply-chain pressures, and thus partly ease the cost and pricing pressure.”

Leach: firms are still feeling the chill

Tom Crotty, chair of the CBI’s Manufacturing Council and group director at Ineos, sees that the latest figures as being “very positive”, adding that “it is great to see the sector bounce back from the bleak situation we saw last year. While this progress is welcome, firms continue to face several supply challenges and cost pressures as the UK moves along the roadmap.

“Manufacturing can be an engine for the UK’s economic growth and renewal over the long-term but, for this to be a reality, it will first be important for government to continue listening to firms to address short-term barriers to recovery,” he adds.

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