Manufacturing orders unexpectedly improve in August, reveals survey

The industrial trends survey from CBI is a well-respected industry report, and this month it revealed an unexpected improvement on manufacturer's order books.

Economists had expected the monthly total order book balance to remain stagnant, but the figures show that output continued to increase at a steady pace for the three months to August.

Above average

The recovery in the number of total orders to well above average came as a surprise to many.

However, export orders showed a more confusing picture, with just over half the sectors showing an improvement while nearly half of the sub-sectors remained below average.

The strength of Sterling has led to mixed blessings for British manufacturers as while input costs fell, finished products became less competitive to overseas buyers. Europe's continued weak recovery continues to have an effect, and the slowing of the Chinese economy is also an issue.

With manufacturers expecting average prices to fall in the next three months, more pressure will be exerted on their margins.

Struggle

The situation was summed up by CBI director of economics, Rain Newton-Smith, who said: "While the rebound in manufacturers’ total order books is encouraging, many firms are still struggling in overseas markets."

"On the one hand, the strength of sterling and cheaper energy are reducing factory input costs, but the strong pound is also hitting export prices and margins hard," he explained.

"With only four per cent of the UK’s exports going to China, the country’s slowdown is not a direct cause of concern for our manufacturers, but it will make life harder for our firms in exposed sectors like metals and commodities" Newton-Smith concluded.