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'Brexit bounce' as manufacturing sector shows robust performance

Published 22/09/2016

The latest CBI Industrial Trends Survey showed output holding firm in the three months to September
The latest CBI Industrial Trends Survey showed output holding firm in the three months to September

There were further signs of a Brexit bounce in the economy as figures showed a robust performance from the manufacturing sector in September.

The latest CBI Industrial Trends Survey showed output holding firm in the three months to September, while manufacturers' output expectations for the next three months doubled to a three-month high.

The total order book balance remained at minus 5%, but was "well above" the long-run average, according to the CBI.

It added that the weaker pound was boosting demand for British products, with export orders also above average, despite easing back a little.

Its survey of 481 firms found that 33% of businesses reported a rise in output volumes and 22% reported a fall, giving a balance of plus 11% - the same as in August.

But 37% of companies expect a rise in output over the next three months and 15% expect a fall, resulting in a balance of plus 22%, the highest since June.

Rain Newton-Smith, chief economist at the CBI, said: "It's good to see that manufacturers are enjoying a lingering summer with output running at a strong pace and manufacturers' order books remaining solid, particularly amongst the food, drink and motor vehicles sectors.

"Our members tell us and our surveys show that the fall in sterling has boosted international competitiveness for many businesses, with export order books remaining well above average in September, despite weakening slightly."

The report showed that 16% of businesses reported export orders to be above normal and 26% below, resulting in a balance of minus 10%, against an average of minus 20%.

Howard Archer, chief UK and European economist at IHS Global Insight, said the CBI report "provides reassurance that the manufacturing sector is currently holding up well - and has got over a blip in the immediate aftermath of June's Brexit vote".

But he warned of "dangers lurking" ahead for manufacturers, with a possible sharp drop in domestic demand for big ticket items, while the weak pound is also pushing up costs.

Despite this, the CBI found manufacturers expect to reduce average prices slightly over the next quarter, with 15% of companies expecting to hike prices and 9% to cut prices, giving a rounded balance of plus 5%, down from plus 8% last month.

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