Stockpiling of raw
materials and finished goods were at record highs among small and medium-sized
(SME) manufacturers in the three months to April.
That’s according to
the latest quarterly CBI SME Trends Survey.
In a survey of 252
SME manufacturers, growth in output volumes slowed to its weakest in
one-and-a-half years, with production expected to be flat over the coming
quarter.
Domestic
orders were flat over the quarter and export orders grew only slightly. Both
are expected to fall over the next three months.
The
survey showed that manufacturers raised stocks of raw materials and finished
goods at the fastest rates in the survey’s history. Stocks of work in progress
were also raised significantly.
Other
results include:
- Business optimism fell for the
third quarter in a row in April, albeit at a slower pace, while export
sentiment continued to fall significantly, again for a third quarter in a
row
- Political and economic
conditions abroad was the most cited factor as likely to limit export
orders, rising to another record high, having now picked up for four
quarters in a row
- Headcount growth picked up
slightly last quarter, while average costs growth sped up in the three
months to April
- Orders or sales were far and
away the main factor cited most likely to limit output next quarter,
albeit with citations remaining below their long-run average
- Investment intentions for the
year ahead remained relatively poor, although manufacturers expect to
raise spending on product and process innovation slightly in the year
ahead, for the first time in a year
- The proportion of firms working
below capacity crept up to its highest in more than two years but remained
below its long-run average.
Alpesh
Paleja, CBI Principal Economist, said: “SME manufacturers ramped up stockpiling
over the last quarter in the face of Westminster deadlock. Against the backdrop
of fairly tepid growth, this would have been a big drag on the resources of
smaller manufacturers.
“Continued
uncertainty meant that some investment plans would also have been restrained.
Manufacturers certainly won’t want to face another cliff-edge come autumn, so
will want to see a Brexit deal finally agreed and over the line.”
Key findings – three months to April:
- Stocks
of raw materials (+33%) and finished goods (+18%) both grew at their
fastest pace on record (since October 1988)
- 42% of
small and medium enterprise (SME) manufacturers reported an increase in
total new orders, and 31% said they decreased, giving a balance of +11%.
New orders are expected to fall (-5%) over the coming quarter
- 33% of
firms said domestic orders increased and 31% said they decreased, giving a
balance of +2%. Domestic orders are expected to decline (-7%) over the
next three months
- 29% of
firms reported an increase in export orders and 23% said they fell, giving
a balance of +6%. Firms anticipate export orders will fall (-10%) next
quarter
- Political/economic
conditions abroad as a factor likely to limit export orders (58%) rose to
the highest on record (since October 1988)
- 35% of
SME manufacturers said output increased and 26% said it decreased, giving
a balance of +9%. Growth is expected to slow next quarter (-3%)
- 22% of
firms said they were more optimistic regarding their business situation,
while 33% said they were less optimistic, giving a rounded balance of
-12%. Optimism about export prospects for the year ahead fell sharply
again (-25%)
- Numbers
employed grew slightly, with 29% of firms saying they had seen growth in
headcount and 18% saying they had seen a reduction, giving a balance of
+12%, although growth is expected to slow next quarter (+5%)
- SME
manufacturers plan to reduce investment in training and retraining (-14%)
in the year ahead, but expect to raise spending on product and process
innovation slightly (+9%)
- Average
unit cost growth sped up in the three months to April (+39%), with firms
expecting similarly strong next quarter (+35%).
