The results from the latest CBI Industrial Trends Survey (ITS) show another decline in manufacturing output volumes in the latest 3 months, with another reduction expected in the coming period.  Total new orders also fell sharply with no improvement indicated for the next 3-month block.  There was a sharp drop in investment intentions, which are at their weakest since the pandemic.

Before embarking on a detailed look at the latest results it is worth noting that although they are labelled as being for “January”, this is the month of publication and data collection took place between 19 December and 13 January;  therefore, these results really refer to December, with the three-month blocks corresponding to the calendar quarters (Q4-24 up to “January” and Q1-25 for the future).

The reduction in manufacturing output volumes up to “January” was significant but not quite as fast as in the period to “December” (that had been the steepest since the pandemic).  Output fell in 12 of the 17 sub-sectors, led by declines in the “glass & ceramics”, “timber & wooden products”, “furniture & upholstery”, and “plastic products” groups.  It is worth noting that none of these are our key industries and are a mixture of intermediate and consumer goods.

The respondents expect another fall in output volumes in the coming 3 months and a slightly faster pace than we saw for the three months to “January”.

Total new orders (this is a quarterly rather than monthly question) fell at a faster pace than in the “October” survey, reflecting reductions for both home and export orders;  the pace of decline accelerated for the latter compared to the “October” survey.  Another decline is predicted for the coming 3-month period and the level of order books remains the key factor restricting activity over this period (skilled labour and, to a lesser extent, materials/components are the other significant factors but well behind order books).

This is one of the longer quarterly surveys that includes questions about investment intentions and capacity utilisation and this is where the really bad news lies.

The balance for investment intentions in the latest survey is -41;  going back to 2005, this is the 4th worst value, beaten only by the first two surveys in 2009 (in the global financial crisis) and April 2020 (at the outbreak of Covid).  The 4-quarter moving average takes longer to react but the value for this is now the lowest since early 2021 when the pandemic effects had been running for a year.

Although the balances for transport equipment (-53) and metal products (-26) improved from the “October” survey – the former could hardly have got worse given that it was -96 – both remain firmly negative.  The balance for mechanical engineering (machinery) (-51) fell sharply and is now at its lowest for 3 years.

Interestingly, among the factors noted as limiting capital expenditure, the main two – “uncertain demand” and “inadequate return” – both fell back a little and are below their long-run average.  Nothing else really stands out as replacing these factors, although reports of a “shortage of internal finance” did edge up to its highest level since the July 2023 survey.

Less surprising is that reports of the need to invest to either “expand capacity” or to “improve efficiency” also fell back and, along with “replacement”, are at below-average levels.  The first of these is at its lowest since October 2009 and the latter has set a new survey record low.

Finally, although the percentage of firms who reported that they were working below capacity edged up again in this survey, it is still quite a way behind what we saw in the first two surveys in 2024, albeit still above the long-run average.

The CBI press release on these survey results is available on their website at https://www.cbi.org.uk/media-centre/ (23 January) or we can let you have a copy of the summary of the results and some charts around the investment intentions data.

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