The latest results from the CBI Industrial Trends Survey (ITS) showed an improvement in the overall sentiment; output was broadly stable in the three months to April* after falling steadily from the start of the year and while orders are still declining, this is at a slower pace than in the January* survey. The details are somewhat mixed as we shall see as we go through the various elements.
There is some good news on output as while the overall trend was flat, it increased in 10 of the 17 sub-sectors with aerospace, food & drink and mechanical engineering specifically mentioned as being positive and offsetting the declines in the chemicals and metal products industries. The outlook for the coming three months (effectively Q2-24) is for output to increase, although it has to be said that this question has not been too reliable in recent periods.
Total new orders fell slightly in the three months to April* although this was at a slower pace than in January*. This was driven by a slower decline in domestic orders, with exports orders falling at a steady pace. Expectations from this survey are that total orders will return to growth over the next three months driven by a recovery in domestic orders, while export orders are anticipated to be unchanged. However, the share of firms citing orders or sales as a factor likely to limit output in the next quarter rose to its highest in more than 3 years and eclipsed concerns about supply-side factors for the first time since mid-2020.
This is one of the longer quarterly surveys that includes the questions about investment intentions and capacity utilisation. The sentiment indicators in this survey improved and this was accompanied by an improvement in the investment intentions indicators with plant & machinery edging into positive territory for the first time in a year and above the long-run average.
However, drilling into the detail, there is slightly less good news in that the improvement in plant & machinery investment intentions was in intermediate and consumer goods with no change for the investment goods industries which are of most interest to us. Indeed, for this industry, the indicator remains at the level in the January* survey which was the weakest reading since the pandemic.
It is also worth noting the trends by company size with the main turnaround coming among the largest companies in the survey; the balance for the small companies fell slightly with the medium sized organisations reporting a significant but smaller negative balance.
There is little of significance in the reasons for capital investment there is a noticeable fall in reporting of “uncertain demand” and “cost of finance” compared to the January* survey with none of the other factors seeing an increase.
Finally, the measure of the current rate of operations as a percentage of “full capacity” increased slightly and it at its highest since the July 2023 survey, although it remains below the long-run average.
* Note that April is the month of publication but with data collection taking place from 25 March to 12 April, these results really refer to March, with the three-month blocks corresponding to the calendar quarters (Q1-24 up to “April” and Q2-24 for the future).
The CBI press release on these survey results is available on their website at https://www.cbi.org.uk/media-centre/ (24 April) or we can let you have a copy of the summary of the results and some charts around the investment intentions data.