UK manufacturers’ order book balance worsens more than forecast in January

The latest survey by the Confederation of British Industry (CBI) revealed on Thursday the UK manufacturers' order books worsened in January, reversing December’s strong improvement.

According to the report, the CBI's monthly factory order book balance decreased to -38 in January from -25 in the previous month. Economists had forecast the reading to come in at -35.

The CBI also reported that output volumes in the three months to January were broadly flat, following 15 consecutive months of drops (-2 from -6 in December). However, it was expected that output would decline once again in the next quarter (-24).

In other survey results, average cost growth in the quarter to January (+34) accelerated to its quickest pace since July 2018 (+36). Cost inflation was also forecast to accelerate further in the next quarter (+55), marking the highest expectations since July 2008 (+58). Meanwhile, average domestic prices grew in the quarter to January (+7) at their quickest pace since April 2019 (+11) and were seen to grow at a broadly similar rate next quarter (+4).

 “Output was broadly flat in this month’s quarterly survey, with the picture varying in different sectors. Manufacturers across the board are continuing to battle major headwinds, with domestic and export orders notably falling”, noted Rain Newton-Smith, CBI Chief Economist. “With growing costs and materials shortages mounting further pressure on firms at a time when they’re experiencing much less demand, the Government must avoid tapering off existing business support with a cliff edge in March.”

Meanwhile, Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “While the start of 2021 is challenging, the COVID-19 vaccine drive brings with it a real sense of optimism for the future. The manufacturing sector can be an engine for UK’s economic recovery post-covid and firms are keen to work with government to make this happen. In the meantime however, it’s essential that the sector receives the support it needs to get through the next few critical months."