New orders in the manufacturing sector increased in the three months to July for the first time in a year, while production continued to rise modestly, according to the latest CBI quarterly Industrial Trends Survey.
Optimism among manufacturers about both the general business situation compared with the previous three months, and export prospects for the year ahead, grew for the second quarter in a row.
Meanwhile, employment in the sector also continued to rise, recording the strongest growth in a year – this marks the 12th consecutive quarter of hiring, which the CBI says is a survey record.
The survey of 390 firms found that both domestic and export orders rose – though still disappointing manufacturers’ expectations of stronger growth - domestic orders recorded the strongest growth in a year, and export orders the fastest in more than two years.
Firms are said to anticipate a further modest rise in orders and output in the coming three months, and expectations for growth in new domestic orders are at their highest since April 2012.
Elsewhere, there were signs of the squeeze in manufacturers’ margins easing. Domestic price inflation picked up a little in the three months to July, in line with expectations. But, growth in manufacturers’ unit costs fell to a year-low and is expected to fall further in the coming quarter.
Despite a further rise in optimism, investment intentions remained muted. Planned spending over the next twelve months (compared with the previous twelve months) on buildings is expected to be unchanged, while planned capital expenditure on plant and machinery deteriorated slightly, though remained above average.
When asked about factors likely to limit investment, manufacturers most often cited uncertainty about demand, which was of slightly greater concern than usual.
Stephen Gifford, CBI Director of Economics, said: “Manufacturers have seen a pick-up in activity across the board this quarter, with new orders and production continuing to rise.
“Optimism in the sector has risen again, and demand conditions are expected to improve further in the coming three months.
“The gentle rise in confidence is being reflected in firms’ headcount, which is rising at the fastest rate in a year.
“But manufacturers remain concerned about political and economic conditions abroad limiting export orders, which is likely to reflect heightened uncertainty over the global economic outlook.”