Smaller manufacturers offer upbeat forecast

Smaller manufacturers expect demand to rise over the coming months, a new survey has revealed.

The latest CBI SME Trends survey found that, of the 382 firms polled, 31 per cent predicted that output would rise in the next quarter.

Some 12 per cent forecasted a fall, giving a balance of +19 per cent compared with a balance of +9 per cent in the past three months.

The rise in output is expected to be driven by improving domestic and overseas demand, the CBI said.

Domestic orders are likely to pick up in the next three months after stabilising during the three months to October.

Export orders are expected to continue growing solidly in the coming quarter (+13 per cent) compared with +11 per cent in the October quarter.

There was good news on the employment front too. The numbers employed rose across the sector (a balance of +7 per cent) at the fastest rate since April 2008.

Business investment looks set to rise as well. Firms said they plan to invest more in plant and machinery (a balance of +6 per cent), product and process innovation (+10 per cent), but less on buildings (-15 per cent).

Russel Griggs, chairman of the CBI’s SME Council, said: “Smaller manufacturers saw the pace of output growth slow slightly in the last three months after the fillip from stock rebuilding dwindled.

“But manufacturers expect a faster rise in production in the coming three months as demand at home strengthens. It is encouraging that firms have increased their headcount this quarter and are now planning to invest in plant and machinery, and innovation.”

The survey follows on from other figures that suggested the UK’s manufacturing sector as a whole grew at a higher than predicted rate in October.

The Markit/Chartered Institute of Purchasing and Supply (CIPS) reported that its purchasing managers’ index for manufacturing climbed from 53.5 in September to 54.9 in October. Some predictions had the figure falling to 53.1.

The mark represents a seven-month high point for manufacturing activity.

The manufacturing PMI has now been in positive territory – any figure above 50 indicates expansion – for 15 months.

In another sign of growing confidence, manufacturers boosted stock levels for the first time since November 2007.

Rob Dobson, senior economist at Markit, said: “An improvement in the UK manufacturing PMI for the first time since May’s 15-year high will provide reassurance that manufacturing remained a driver of UK economic growth at the start of the final quarter.

“Rates of expansion in output and new orders strengthened following the sharpest gain in new export orders for five months, with the export performance of intermediate and investment goods producers especially robust.”

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