Rise in orders gives a boost to UK industry

FACTORY output in the UK is increasing and fewer firms are working below capacity, new manufacturing data showed yesterday.

Output volumes and total new orders rose in the three months to April and are expected to continue increasing, the Confederation of British Industry’s Quarterly Industrial Trends survey found.

But the soaring cost of raw materials pushed up unit costs, prompting firms to raise selling prices at the highest rate since 1995. Citigroup economist Michael Saunders said pressure on firms’ production capacity and rapid increases in selling prices were signs that manufacturers were “experiencing the biggest boom for many years”.

In the three months to April, volumes of new orders rose at 36 per cent of companies while 15 per cent reported a fall, giving an overall balance of 20 per cent of companies reporting an increase in orders.

In a sign that price pressures are continuing to build in the economy, both the monthly and quarterly price expectations balances in the CBI survey rose to +36 in April – their highest since January 1990. The number of companies working below capacity fell to 55 per cent, from 62 per cent a year ago, while 29 per cent of firms said lack of plant capacity could constrain their output in the coming quarter.

But economists saw weakness in April’s monthly result, as a net 11 per cent of firms said order books fell. In March, five per cent reported a rise.

“There are worrying signs from a slump in orders in April and ongoing price pressures,” said Markit chief economist Chris Williamson.

New orders rose at a net balance of 20 per cent of manufacturers – those who said they rose minus those who said they fell. The same level of firms said output rose, up from eight per cent in January, while a net 22 per cent also expected output to continue to grow in the next quarter.

Restocking of inventories saw stocks rise to levels not seen since 1995, and a net 15 per cent said they were hiring new staff.

FAST FACTS | UK MANUFACTURING
55 per cent of firms are operating below capacity, down from 62 per cent last April.

29 per cent of firms feel lack of factory capacity will constrain their output next quarter.

Selling prices rose at fastest rate since 1995.