The latest results from the CBI Industrial Trends Survey (ITS) showed output volumes fell in the 3 months to October, although at a slower pace in the equivalent period to September. Orders were also negative. Updating the comments made at the forecast seminar, the improvement in investment intentions for plant & machinery that we saw earlier in the year was reversed in this survey.
Before we take a detailed look at the latest results it is worth noting that although they are labelled as being for “October”, this is the month of publication and data collection took place from 25 September to 14 October; therefore, these results really refer to September, with the three-month blocks corresponding to the calendar quarters (Q3-24 up to “October” and Q4-24 for the future).
Output volumes for the respondents to this survey fell slightly but at a much slower pace than in the 3 months to September; however, this mainly reflects a flatter profile with only 4 of the 17 sub-sectors covered in the report showing growth in production levels; encouragingly, these included motor vehicles & transport equipment and mechanical engineering (machinery) which means that the implications for our customers output levels are a little better than the headline suggests.
Expectations for Q4-24 are for little change in overall output levels, although it is worth noting that the surveys earlier in the year were pointing to significant growth in output in the coming quarter; the balance to this is, however, that these expectations were not realised.
Total new orders declined in Q3-24 and at a slightly faster pace than in the previous quarter. This reflects reductions in both domestic and export markets, with the former indicator falling at the fastest pace since the distortions of the pandemic. Looking forward, orders are expected to fall again in Q4-24, although this is concentrated in the UK market, with export demand predicted to be unchanged.
This is one of the longer quarterly surveys that includes the questions about investment intentions and capacity utilisation – we promised an update on this as these were key indicators in our forecasts which were released yesterday at our Seminar.
Earlier in the year, we had seen a pick-up in the overall balance for investment intentions in plant & machinery but this was reversed in the latest results, falling back to its lowest level since the January survey, although the 4-quarter moving average was unchanged as this was similar to the level we saw this time last year.
Of particular concern was a very sharp downturn for the motor vehicles & transport equipment group, although some caution is needed as there are only a dozen respondents in this group. Mechanical engineering (machinery), which has more responses, has broadly flat investment intentions but the indicator for the metal products industry remained fairly negative.
Compared to the “July” survey, there was a notable increase in reports overall that “uncertain demand” was the main factor to be restricting investment – it moved just above its long-run average for the first time since “January”. There was also a small up-tick in reports of both “inadequate returns” and a “shortage of labour”.
At the Forecast Seminar, we noted a conundrum in the “July” results in which an increase in reports of needing to invest to expand capacity had been accompanied by a fall in capacity utilisation. This has been resolved in the “October” results but, unfortunately, this is in the form of a fall in the need to expand capacity which dropped back to the sub-par levels we saw earlier in the year rather than an improvement in utilisation of existing capacity – indeed, the latter edged down further in this survey.
The CBI press release on these survey results is available on their website at https://www.cbi.org.uk/media-centre/ (24 October) or we can let you have a copy of the summary of the results and some charts around the investment intentions data.