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Manufacturing orders up, but prices on the rise

British factories have seen their order books improve to the best level since the EU referendum according to the latest CBI Industrial Trends Survey but price rises are looming.

The survey of 430 manufacturers found that total order books returned to levels seen throughout the summer, and well above the long-run average. Meanwhile, export orders dipped a little, but remained above average.

Output volumes rose at a slower pace over the past three months. Expectations for production over the coming quarter are robust, however, reaching their highest level since February 2015.

In the wake of sterling’s sharp depreciation, manufacturers expect to increase average selling prices over the next three months, at the fastest pace since January 2014. Three quarters of the rise in the balance comes from the food and drink sector, with price hikes for popular household commodities.

Rain Newton-Smith, CBI Chief Economist, said: “It’s good to see manufacturers’ overall order books at healthy levels, and the outlook for output growth remaining robust as we head into Christmas.

“But the weak pound is beginning to make its mark, and prices are expected to rise, especially in the food and drink sector. On the flip side though, export orders remain above average.

“To bolster British industry, manufacturers want to see bold decisions in the Autumn Statement. A crystal clear focus is needed on infrastructure, investment and innovation from the Chancellor, so that firms are given the very best environment in which to grow, both at home and abroad.”

23% of manufacturers reported that their total order books are above normal, while 26% said they were below normal, giving a balance of -3%.

This was above average, and back to the levels seen through the summer. It suggests the sector is stable, despite the uncertainty around Brexit.

But the survey also shows that firms expect to hike prices in the next few months, following the slump in the pound’s value since the Brexit vote. Food and drink manufacturers are particularly affected.


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