Manufacturing recovery on track

Wednesday 27th April 2011

But as the US National Institute of Standards & Technology (NIST) sets up a manufacturing innovation blog, the CBI Scotland warns that our output prices have soared. Time for some innovative thinking perhaps!

Strong domestic and export orders growth has boosted factory output, but inflationary pressures continue to intensify as companies pass on the burgeoning cost of raw materials by raising the price of goods at the factory gate.

“Production costs have jumped markedly during the last three months, rocketing ahead after a full year of already rapid cost inflation. This is unsurprising given the recent surge in oil and other commodity prices,” comments John Cridland, CBI Director-General.

Of the 451 manufacturers that responded to the April Quarterly Industrial Trends Survey, 36% said they had seen an increase in output in the last three months, against 15% that said it had fallen, giving a rounded balance of +20%.

This was driven by strong growth in both domestic (+15%) and export (+24%) orders, with the rates of growth at their fastest since April 1995 (+17% and +34% respectively). 

Demand and production are expected to continue rising over the next three months. Companies predict output growth will be sustained at a similar pace to this quarter (+22%).

Manufacturers expect domestic and export orders to continue to increase over the next quarter (+11% for both), at rates well above their long-run averages. 

Output has also been boosted by rapid restocking over the past quarter.

Companies have built up inventories of raw materials (+13%), work in progress (+10%) and finished goods (+17%) to the greatest degree since July 1979 (+13%), January 1995 (+10%) and July 1977 (+19%) respectively.

In line with the ongoing recovery in the sector, manufacturers took on more staff for the third quarter running. The net number of companies saying that they had added to their workforces in the last three months (+15%) was the highest since January 1974 (+21%).

The outlook for employment over the next quarter is also positive, with a balance of +7% of firms expecting to recruit. 

But costs have risen rapidly during the last quarter. A balance of +53% said average unit costs had gone up, the highest since October 2008 (+56%), and a further acceleration on significant cost rises already experienced over the past year.

Manufacturers have driven up domestic and export prices rapidly (+29% and +30%), with the rates of inflation the strongest since April 1995 (+29%) and April 1985 (+34%) respectively. 

Inflationary pressures show no sign of receding over the coming quarter, with firms expecting costs and prices to increase sharply again over the next three months (a balance of +43% for average unit costs, +36% for domestic prices, and +25% for export prices).

Manufacturers have also reported a further tightening in capacity pressures. 29% of firms expect plant capacity to be a likely constraint to output over the next three months, the highest since October 1988 (29%).

As a result 46% of companies plan to invest to expand their capacity during the next twelve months, a survey high (October 1979). 

Investment intentions on the whole remain strong. In particular, firms plan to spend more on plant and machinery (+7%) and product and process innovation (+28%) during the coming year relative to the previous twelve months.

NIST pushes Manufacturing Innovation

While Scotland can boast a business blog, could be worth taking a leaf out of the NIST approach of  manufacturing innovation blog.

Two things to catch the eye on it was first that the NIST blog made a case for seeing that manufacturing and services both deserve support and backed that up by an Oxford Economic Estimates from Global Express members.

The second fall-around graph is simply headed
"Shirley, you can't be serious!"


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