UK manufacturers’ order book balance unexpectedly increases in September

The latest survey by the Confederation of British Industry (CBI) revealed on Monday the UK manufacturers' order books rose in September, hitting the highest level on record.

According to the report, the CBI's monthly factory order book balance increased to +22 in September from +18 in the previous month. This was the highest reading since April 1977. Economists had forecast the reading to come in at +15. Meanwhile, export order books (-2 from -16 in August) improved to their highest balance since March 2019 and was well above its long-run average (-18).

The CBI also reported that output volumes in the three months to September (+16 from +22 in August) decelerated for the second consecutive month but remained firm by historical standards (long-run average of +3). It was also expected that output growth would accelerate in the next three months (+25).

In other survey results, stock adequacy picked up slightly from its record low in August (-11 from -14) but remained weak overall (long-run average of +12). In addition, manufacturers’ expectations for output price growth in the next three months remained strong (+41 from +43 in August, long-run average of +3).

“Today’s survey highlights how amidst a variety of supply challenges, companies are beginning to struggle to meet high demand,” noted Anna Leach, CBI Deputy Chief Economist. “Despite close to half of manufacturers surveyed reporting order books above normal, output growth has slowed sharply, albeit remaining relatively robust. As well as skill and labour shortages, sharply increasing material costs and shortages of key components, producers now face rocketing energy prices.”

Meanwhile, Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “It is reassuring to see order books reaching new highs, but global supply chain issues and cost pressures are continuing to hold back the sector. It is important that these issues are addressed as a priority.”