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Production rises coincide with increased inflation

Manufacturers anticipate an increase in output over the next year, but also expect inflationary pressures to pick up during 2012, according to the CBI.

Over 400 manufacturers responded to the CBI’s monthly Industrial Trends Survey, of which 39% believe that output would rise in the next quarter, while 15% expect it to fall. The resulting balance of +24% is the strongest since +27% was recorded in March 2011.

Order books also remained above average, albeit slightly lower than last month. 18% of respondents said that order books were above normal, while 26% said they were below, resulting in a balance of -8%. This is far stronger than the long run average of -17%.

Ian McCafferty, CBI chief economic adviser believes that this indicates that the recovery in the manufacturing sector is now building a positive momentum.

He commented: “Firms again expect a strong rise in output over the next three months, on the back of above-average order books.

“However, expectations for output price inflation have also moved higher, most probably reflecting the recent rise in oil prices.”

Despite some positive results, export demand has weakened at -11%.

Expectations for output price inflation have also increase, with 24% of firms expectating to raise output prices in the coming quarter. This is the highest since June 2011, where the figure was recorded at 27%.

McCafferty continued: “Any further rise in oil prices would be a significant concern, given the additional cost burden this would place on UK manufacturers and the knock-on effects it could have on the nascent recovery.”

Stocks of finished goods stayed broadly in line with the long-run average, of 14% at 17%.

This was posted in Bdaily's Members' News section by Ruth Mitchell .