Manufacturing sentiment improves in April – CBI Industrial Trends Survey

According to the latest quarterly Industrial Trends Survey from the CBI, sentiment in the manufacturing sector showed improvement in April, with the strongest output expectations recorded in six months.

In the three months leading up to April, output volumes remained stable, contrasting with the significant decreases observed during the first quarter of 2024. Manufacturers are now optimistic, anticipating an increase in output over the next quarter, marking the most positive outlook since October 2023. Although average cost growth continues to be high compared to historical norms, it is expected to maintain a robust pace into the July quarter. Predictions for domestic and export price inflation also indicate a slight increase in the coming three months.

A decline in demand uncertainty and reduced worries about financing costs have led to more positive investment intentions for the upcoming year compared to January. Manufacturers now foresee stable investments in buildings and plant & machinery over the next year, which represents a change from the decline in investment intentions noted at the start of the year. Furthermore, there is an expected rise in spending on product and process innovation.

Anna Leach, the Deputy Chief Economist at CBI, commented on the improvements: “Manufacturers are experiencing better conditions, with enhanced sentiment and the most robust expectations for future output growth in six months. A more relaxed labour market has lessened worries about potential constraints from skills and labour shortages. Additionally, concerns about obtaining materials and components are at their lowest since January 2020. These positive developments are creating a more stable environment for investment over the next year.”

Leach also emphasized the need for continued focus on major reforms to aid the manufacturing sector’s growth and investment, particularly advocating for full capital expensing to potentially include leased and rented assets, which she believes could significantly benefit economic growth.

Key findings from the survey, which gathered responses from 257 manufacturing firms, include:

  • Business sentiment improved significantly this quarter, marking a shift from previously stagnant levels.
  • While output volumes were stable this quarter, there is an optimistic expectation for growth in the upcoming quarter.
  • Although total new orders declined in April, the decrease was less severe than in the previous quarter, with expectations for order growth in the near future.
  • Cost per unit of output continues to rise, albeit at a slightly slower pace than before, with predictions for continued high cost growth.
  • Selling prices, both domestic and export, have risen, with expectations for further increases.
  • Investment intentions for the year have improved, particularly in areas of innovation, with stability expected in other investment areas like training and tangibles.
  • The main barriers to investment highlighted were demand uncertainty, insufficient net returns, and labour shortages, though concerns about financing costs have decreased.

This summary provides an overview of the current conditions and outlook for the manufacturing sector as detailed in the CBI’s Industrial Trends Survey.

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