UK manufacturers’ order book balance improves more than anticipated in March

The latest survey by the Confederation of British Industry (CBI) revealed on Tuesday the UK manufacturers' order books improved in March.

According to the report, the CBI's monthly factory order book balance increased to -5 in March from -24 in the previous month, surpassing their long-run average of -14. This was the highest reading since April 2019. Economists had forecast the reading to come in at -20. Meanwhile, export order books (-20) strengthened on February (-39), approaching to their long-run average (-18).

The CBI also reported that output volumes in the three months to March were broadly flat (+3 from -8 in February), which marked their highest balance since May 2019. It was also expected that output would pick up rapidly in the next three months (+30), marking the strongest expectations since August 2017.

In other survey results, output prices were seen to accelerate in the next three months (+20 from +3in February), marking the strongest expectations for price growth since February 2019).

“It’s great to see the mood lift among manufacturers, buoyed by a jump in order books”, noted Anna Leach, CBI Deputy Chief Economist. But firms continue to grapple with higher freight costs as well as raw material shortages. “Consequently, manufacturers anticipate prices to grow at a quick pace next quarter. Meanwhile, risks to growth in European markets are elevated given the slow pace of vaccine roll-out and the likelihood of further lockdowns.”

Meanwhile, Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “The improvement in order books, and the more positive outlook for output, is a welcome boost for the sector following a difficult start to 2021. Nevertheless, there can be no doubt that this progress is fragile and the sector continues to operate in a challenging landscape. Container shortages and higher freight costs are causing issues with supply chains and many firms are also encountering unanticipated difficulties with the new post-Brexit trading arrangements. It’s therefore important for the government continues to support the sector through the coming critical weeks and months ahead.”