By Daniel Hunter

Manufacturers expect output to accelerate sharply in the next three months, according to the CBI’s latest monthly Industrial Trends Survey.

The survey of 398 firms found that output growth over the last three months remained steady but subdued.

But the outlook is much brighter for the next quarter, with output volumes expected to rise rapidly - the strongest expectations since April last year — with the anticipated pick-up in particularly marked in the food, drink & tobacco and mechanical engineering sectors.

Exports orders are also at their highest level for three months, while total orders are broadly flat. Meanwhile expected price inflation has fallen back to levels last seen midway through last year.

“Manufacturers appear more optimistic about the next few months than the official figures and commentary would suggest, with sharp rises in output expected right across the sector," Stephen Gifford, CBI Director of Economics, said.

“Total orders were steady and in line with long-run averages and there was some pickup in exports, possibly helped by the weak pound.

“Price expectations have fallen to the lowest level for six months — driven by inflation expectations plummeting from near-record highs in the food, drink and tobacco sector.”

The survey was conducted between 21st February and 13th March.

Key findings:

- 15% of firms reported order books above normal (excluding seasonal variations), and 30% below, giving an overall balance of -15%. It remains in line with long-term average of -17% and in line with reported orders in February (-14%);

- 19% of firms reported export order books above normal, 30% below, giving an overall balance of -11%, the highest level for three months (-11% in December) and well above the long-term average of -21%;

- Output growth over the last three months was steady, with 28% of firms reporting volumes up and 25% down, to give an overall balance of +3% which is in line with expectations at the end of last year. There was strong growth in the three largest sectors - Food, Drink & Tobacco, Chemicals and Motor Vehicles & Transport Environment - but this was offset by falls in other sectors;

- Output is expected to rise sharply over the next three months. Some 35% of firms predict increases and only 13% expect falls — an overall balance of +22%, the highest since April last year. The anticipated acceleration is broad-based, but driven primarily by the Food, Drink & Tobacco sector and Mechanical Engineering sector (which has reported flat or declining output for nine of the last ten months);

- Average prices over the next three months are expected to fall back with 14% of firms reporting prices rising, and 9% predicting drops. The overall balance of +5% is the lowest for six months and a big drop from +21% in January and +20% in February. This was driven almost entirely by inflation expectations in the Food, Drink & Tobacco sector falling from +59% to +2%.

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