By Claire West

UK manufacturers still expect production to grow solidly in the next three months, and demand held up reasonably well in September, the CBI said yesterday.

Responding to the latest monthly Industrial Trends Survey, 20% of manufacturers said that total orders were above normal and 37% said they were below. The resulting balance of -17% is down slightly on last month (-14%). But the figure is broadly in line with the survey’s long-run average (-18%), and is consistent with the trend of improving demand seen over the past year.

Firms’ position on export orders weakened slightly in September, with 23% of companies saying they were above normal and 27% below normal. The resulting rounded balance of -5% is down a little on -1% in August, but this figure is well above the long-run average (-22%), and overseas demand is still considered to be much better than at the start of the year.

Stock levels are only slightly more than adequate this month (a balance of +4%), edging higher following the three-year low in August (+1%). Stock adequacy has consistently been below its historical average so far this year.

The improving trend in overall demand for UK-made goods and the need to replenish stocks has been accompanied by further expectations of growth in manufacturing output. In September’s survey, 27% predict output will rise, compared with 16% expecting it will fall. The resulting rounded balance of +12% is similar to expectations in August (+10%), and an improvement on +6% in July.

However, price pressures in the manufacturing sector intensified for the second month running. A balance of +15% of firms expects to raise prices in the next three months, following +11% in the previous survey.

Ian McCafferty, CBI Chief Economic Adviser, said:

“The outlook for manufacturing activity seems to have held steady this month. Demand is still considered to be better than it was in the first half of the year, export order books are holding up reasonably well and expectations for production growth in the coming quarter remain solid.

“For the second month running, however, inflationary pressures appear to have picked up, as manufacturers anticipate a slightly faster rise in output prices over the next three months.”