UK manufacturers’ order book balance unexpectedly rises in August

The latest survey by the Confederation of British Industry (CBI) revealed on Monday the UK manufacturers' order books increased slightly in August.

According to the report, the CBI's monthly factory order book balance rose to +18 in August from +17 in the previous month. This was well above its long-run average of -14. Economists had forecast the reading to come in at +16. Meanwhile, export order books (-16 from -7 in July) weakened somewhat from last month but still sit broadly in line with their long-run average (-18).

The CBI also reported that output volumes in the three months to August (+22 from +37 in July) decelerated from last month’s record pace but remained firm by historical standards (long run average of +3). It was also expected that output growth will pick up slightly in the next three months (+26).

In other survey results, stock adequacy (-14 from -11 in July) fell to its weakest on record (since April 1977), marking the third month in a row in which a new record-low outturn has been set. In addition, expectations for output price growth over the next three months remained strong, a position broadly in line with last month’s outturn (+43 from +42 in July, long run average of +3) and close to the near-30 year high seen in June (+46).

“Manufacturing activity remained strong this month, with total order books remaining firm and most sub-sectors reporting rising output. However, early signs from the data suggest that growth in activity may have peaked,” noted Alpesh Paleja, CBI Lead Economist. “It is notable that stock adequacy deteriorated to a new record low for the third consecutive month. Many firms are feeling the pinch from ongoing supply chain disruption, which also partly explains the continued strength in pricing pressures.”

Meanwhile, Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “While it is great to see manufacturing performing well, there is no getting away from the fact that many firms are facing serious challenges, such as staff shortages, supply disruption, and rising costs. It is important that these issues are addressed quickly.”