UK manufacturers’ order book balance improves much more than forecast in May

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

According to the report, the CBI's monthly factory order book balance increased to +17 in May from -8 in the previous month. This was the highest reading since December 2017 and marked the first time order books have been considered to be “above normal” since February 2019. Economists had forecast the reading to come in at 0. Meanwhile, export order books (-17) were broadly unchanged from April (-18), but this nonetheless represented the strongest outturn since February 2020 and was around the long-run average.

The CBI also reported that output volumes in the three months to May grew at the fastest pace since December 2018 (+18, up from +3 in April). It was also expected that output (+33) would accelerate further in the next three months.

In other survey results, present stocks of finished goods (-6 from +5 in April) declined to their weakest position since July 2017. This was also the first time since July 2017 that stocks were considered “less than adequate”. Meanwhile, price growth was seen to pick up rapidly in the next three months (+38 from +27 in April), with expectations at their strongest since January 2018.

“Manufacturing activity rebounded this month, with strong improvements seen across total order books and output volumes,” noted Anna Leach, CBI Deputy Chief Economist. “But firms are still feeling the chill as supply shortages fuel cost pressures, reflected in expectations for strong output price inflation in the coming quarter.”