Manufacturing output volumes were broadly unchanged in the quarter to April, according to the CBI's latest quarterly Industrial Trends Survey. While a broad range of sub-sectors reported lower volumes in April, this was offset by higher output in the motor vehicles & transport equipment sector. Manufacturers expect output to fall marginally in the three months to July.
Domestic orders fell through the quarter, as did the volume of new export orders, albeit marginally. Looking ahead, manufacturers expect the total volume of new orders to decline in the three months to July as both domestic and export orders are anticipated to fall. Half of respondents cited political or economic conditions abroad as a factor likely to limit their export orders in the quarter to July, the highest proportion since April 2021.
Manufacturers reported increased cost pressures. Growth in average costs accelerated in the quarter to April, compared with January, while expectations for costs growth in the three months ahead remain firm. Domestic prices are expected to rise at an accelerated pace in the quarter to July, whereas export prices are expected to be unchanged.
Sentiment across the manufacturing sector deteriorated in April and investment intentions for the year ahead are weak. Manufacturers expect to reduce spending on buildings, plant & machinery, product & process innovation, and on training and retraining, which saw the weakest balance since 2020. Manufacturers cited uncertainty about demand, inadequate net returns and labour shortages as key factors constraining capital expenditure.
The outlook for employment remains poor. Manufacturing headcount fell in the quarter to April, at the fastest pace since October 2020, and manufacturers expect numbers to fall again in the quarter to July.
Ben Jones, Lead Economist, CBI, said:
"The recent downturn in manufacturing output appears to have eased, but manufacturers still seem gloomy about their prospects amid rising costs, an expected decline in new orders and heighted uncertainty around global economic conditions."
"The combination of financial pressures, market instability and falling confidence is leading manufacturers to cut back employment and investment, with plans for spending on buildings, equipment, innovation and training all taking a hit."
"The wider geopolitical environment is becoming increasingly challenging for exporters, with export optimism falling sharply for a second successive quarter and export order volumes now hovering around post-pandemic lows."
"The government is right to make the case for global free trade, with the Chancellor in Washington this week at the IMF spring meeting reaffirming that commitment. The uncertainty around global economic conditions only increases the importance of getting it right in domestic economic policy."
"Firms are already feeling the cumulative burden of rises in NICs and the National Living Wage - and tariffs represent another headwind for the business sector. The government needs to view every decision through the lens of kickstarting growth and incentivising investment."
The survey, based on the responses of 389 manufacturing firms, found:
Output volumes were broadly unchanged in the quarter to April, after falling in the quarter to March (weighted balance of -2%, from -18% in the three months to March). Firms expect volumes to fall slightly in the three months to July (-5%).
A broad range of sub-sectors reported lower output volumes (14 out of 17 sub-sectors), but this was largely offset by higher output in the motor vehicle & transport equipment sector.
Domestic new orders fell through the quarter (-13%, from -20% in January) as did the volume of new export orders, albeit marginally (-4%, from -23%). Manufacturers expect both new domestic (-11%, from -33%) and export orders to decline in the three months to July (-18%, unchanged from January).
The volume of total order books was reported as below "normal" but improved slightly relative to March (-26% from -29%). At the same time, the volume of export order books deteriorated sharply in April (-41%, from -29% in March, the weakest since December 2020 with the exception of November 2024, when the balance stood at -44%).
Business sentiment continued to deteriorate in April (-33%, from -47% in January). Export optimism for the year ahead also weakened further (-35%, from -41%).
Numbers employed fell in the quarter to April, at the fastest pace since October 2020 (-16% from -8% in January). Manufacturers expect numbers employed to fall again in the quarter to July (-11%).
Investment intentions for the year ahead remain subdued. Manufacturers expect to reduce investment in buildings (-38%, from -42% in January), in plant & machinery (-33%, from -41%), in product & process innovation (-22%, from -26%), and in training & retraining (-20%, from -14%, and the weakest since April 2020).
The main constraint on capital expenditure was uncertainty about demand (cited by 58% of manufacturers), followed by inadequate net return (38%), and labour shortages (19%).
Average costs rose in the quarter to April, at an accelerated pace (+48%, from +43% in January; long-run average of +19%). Costs growth is expected to accelerate in the quarter to July (+57%).
Average domestic prices rose in the three months to April (+13%, from +2% in January), and export price inflation was broadly flat (+3%, from -5% in January). Domestic prices are expected to rise at an accelerated pace in the quarter to July (+23%), whereas export prices are anticipated to be unchanged (0%).
Stocks of work in progress (-5%), and of finished goods (-4%) fell in the quarter to April. Whereas stocks of raw materials rose (+4%).
Manufacturers expect stocks of raw materials (-11%), of work in progress (-10%), and of finished goods (-6%) to all fall in the three months to July, although all at a slower pace than expected in January where all three categories were expected to fall at their fastest paces in four years.
