Weaker pound leads to a boost in UK export orders

Manufacturers are expecting output to grow at a robust pace the CBI says
Manufacturers are expecting output to grow at a robust pace the CBI says

Britain’s manufacturers have reported rising demand driven by a rebound in export orders on the back of a weaker pound.

The latest Confederation of British Industry (CBI) industrial trends survey showed that 30% of manufacturers said their total order books were above normal in August, compared to 17% that experienced lower levels over the same period, resulting in a balance of plus 13%.

That is above the long-run average of minus 14%, and July’s balance of 10%.

Those figures were driven by stronger export order books, as a rounded balance of 11% of manufacturers reported above-normal overseas demand in August, compared to 2% in July.

Anna Leach, the CBI’s head of economic intelligence, said the Brexit-hit pound - which has made UK goods cheaper for overseas buyers - is to thank for the rise.

“There are further signs that exporters are feeling the benefit from the lower pound in this month’s figures, and output growth is expected to power on over the coming quarter.

“But after a brief pause last month, expectations for selling prices have rebounded, indicating that the squeeze on consumers is set to persist.”

The poll - which surveyed 432 businesses - found that a balance of 19% of manufacturers are expecting a rise in output prices over the next three months, which is up from a balance of 9% in July.

But rising output prices could spell further trouble for British consumers.

Rising factory gate prices have been passed down to shoppers in recent months, leaving household finances squeezed by climbing inflation, which came in at 2.6% in July.

“We expect CPI (Consumer Price Index) to top out at around 3% towards the end of this year and remain close to that level during 2018, as the effect of the weak pound continues to feed through,” Ms Leach said.

Output volumes over the three months to August dipped slightly to a balance of 30%, down from 31% recorded in the three months to July.

The CBI said manufacturers are now expecting output to grow “at the same robust pace” over the next three months, with 38% expecting growth and only 7% predicting a decline, resulting in a rounded balance of 30%.