CBI Industrial Trends Survey, March 2023: The CBI released the results of their latest Industrial Trends Survey earlier in the week and it made rather gloomy reading. Manufacturing output fell in the three months to March* although at a slower pace than in the previous survey. Output fell in 9 of the 17 sub-sectors with the overall decline driven by the food & drink, mechanical engineering (machinery) and paper, printing & media groups.
There is some good news with manufacturing output predicted to increase in the coming three months; however, this is the third consecutive months with positive expectations and they have yet to come true.
The likelihood of this happening is reduced by the fact that total order books were reported to be below “normal” in March* and to a slightly greater extent than in the previous two surveys which also had weak order books. The result in this survey is the weakest reporting of order books since February 2021. Export order books were also reported to be below “normal” but this has eased slightly compared to the previous survey.
Stocks of finished goods were reported to be “adequate”, although a little below the long-run average for this question.
* Note that although this survey is dated March, the data collection took place between 23rd February and 14th March so the results are likely to refer to the 3-month periods from December 2022 to February 2023 (past) and March to May 2023 (future).
You can get the Press Release of the CBI ITS from their website at www.cbi.org.uk/media-centre (22 March) or request it from MTA (we can also provide a summary of the results).
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Bank of England’s Agents’ Summary of Business Conditions, Q1-2023: Members will, of course, be aware that the Monetary Policy Committee (MPC) voted 7-2 to increase the Bank Rate by 25 basis points to 4.25%. We leave the general commentary on this to other news channels but one of the supporting documents to the MPC meeting was the quarterly report from the Bank of England’s Agents who meet with businesses around the country to provide feedback to the Committee.
The Agents latest report notes that manufacturing output has continued to fall as consumers demand for goods has been restricted by falling real wages. This is highlighted by the fact that the agents noted that the fall in manufacturing output was led by durable goods – items such as household appliances and home improvement products. Demand for construction products also fell, while car production remains subdued.
There was some good news with aviation and defence companies reporting strong growth and machinery producers noting that output is being supported by long order backlogs (which arose because of supply chain problems). Goods exports are broadly flat with increased demand from China and the USA for machinery parts and consumer goods off-set by weaker demand from the EU.
There was an improvement in investment intentions which was attributed to a desire to increase automation in the light of rising labour costs and to improve energy and production efficiency to counter high energy prices – this suggests that this is mainly going benefit our sector. Manufacturing firms also reported investing in research and development.
You can find the Bank’s Agents Summary with more details on their report at https://www.bankofengland.co.uk/agents-summary/2023/2023-q1 with the minutes of the MPC meeting available at https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2023/march-2023.