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CBI Industrial Trends Survey, October 2021:  The results from the CBI Industrial Trends Survey (ITS) paint a picture of a resilient manufacturing sector in which output volumes grew strongly despite a range of supply challenges and cost/price pressures. The survey identified an easing in total orders but this comes as a comparison with the multi-decade high levels registered last quarter - as a result, total orders growth remains at a high level.  The slowdown in orders was mainly in the domestic market with export orders growing at a broadly similar pace to the 2nd quarter.

Given the timing of the data collection period for this survey (24th September to 12th October) the three month period covered by the question corresponds to the  3rd quarter of the year.  

Overall, output increased at the above average pace we saw last month (but lower than the exceptional rate recorded for Q2), with increases recorded in 11 of the 17 sub-sectors. The headline improvement was driven by the chemicals, aerospace and food & drink groups. Looking at the next three months - effectively the 4th quarter - output growth is expected to accelerate and total new orders are also set to pick-up, driven by an improvement in both domestic and export demand.

Capacity utilisation rates have increased with the percentage of respondents working below capacity falling to its lowest level since April 2019 while the proportion whose capacity is at least adequate to meet expected demand is at its lowest ever level.  Other data from the survey also highlights the supply chain problems faced by the manufacturing sector with two-thirds of firms saying that the availability of materials/components is likely to be a constraint on output in the coming quarter - this the highest rate for this measure since January 1975.  Alongside this, reports of a shortage of skilled labour were at its highest since July 1974 and one-third of respondents were concerned that about delivery dates limiting export orders in the next quarter (the highest since October 1974).

Finally, this survey also gives us the latest indicators of investment intentions; the figures for spending on plant & machinery have eased from the July report but are still well above the long-run average.  Among the reasons for capital expenditure, while both “replacement” and “increase efficiency” both edged up to their long-run average level, in the light of the increase in utilisation reported above, spending to expand capacity returned to the level we saw in the April survey and well above the long-run average. The main change among the constraints to investment is a rise in reporting of inadequate net return but this remains below the long-run average while although there was little change in reports of labour shortages holding back investment, it is still at a high level.

You can get the Press Release of the CBI ITS from their web-site at (21 October) or request it from MTA - we can also provide a summary of the results and some charts around the investment intentions data which update those used at the Forecast Seminar.

Flash Purchasing Managers Index, October 2021: Today is the release date for the flash indications from the Purchasing Managers Index (PMI), so the timing of the Friday Brief means that we can’t include the USA in these notes. It is worth bearing in mind that the PMI is an index measuring change rather than levels. The index is calculated using the proportions of the responses that were “up” or “same” for various factors when compared to the previous month. So while we focus on 50 as the crucial divide between expansion and contraction, an index of 50 actually implies no change on the previous month;  if the levels behind that were at, for example, record high levels, then 50 is actually not necessarily a bad thing in terms of the level of activity but we have no way of knowing how large those “up” (or indeed “down”) changes were, so there is no difference between a respondent whose business doubled and one that was only up by +5%. For that reason, the PMI can only give a direction of the business trend with an indication of the spread of that trend.

The flash manufacturing PMI for the UK improved slightly to 57.7 for October although a note of caution in that this was mainly because of further lengthening of delivery times which, perversely in the current circumstances, the PMI calculation treats as a positive indictor of activity. This is borne out by the fact that the output element of the UK manufacturing PMI fell to 50.6 which is an 8-month low with respondents commenting that they had problems meeting customer demand due to problems with both supplier delays and labour shortages. Despite this, orders remain strong which suggests that once the bottlenecks are resolved, we should see output recover.

We see a similar picture in the Euro-zone although inevitably there is some variation within the region. The overall trend saw the flash manufacturing PMI drop only a fraction to 58.5 with the output element moving down to 53.2 (from 55.6 in September) with the lengthening supplier delivery times at a level only seen once before in the 20 year history of the survey (that was in May of this year) in the face of supply shortages and transportation problems. The report notes that the automotive sector was the worst hit by these problems and saw a fall in output.

We only have country reports for Germany and France and these also make interesting reading. Germany, like the Euro-zone overall, only saw a small fall in the total PMI (to 58.2 from 58.4 last month) but a more significant reduction in the output element which now stands at 51.1 (54.2 in September). While orders are still rising, the pace of this improvement was the slowest for 8 months and largely driven by export demand rather than the German market. The picture in France is even more dramatic with the overall PMI down to 53.5 and the output element actually in negative territory at 46.2 - its lowest level for 17 months (which was at the height of the initial pandemic shutdowns). For France, there is even reference to customers cancelling or postponing orders because of the delivery delays.

Finally in Japan we saw a somewhat different picture with the flash manufacturing PMI rising to 53.0 which, if confirmed, would take it to a 3-month high, matching the rate we saw in July. This appears to have been driven by the declines in both orders and output that were registered in September being reversed to small improvements and optimism for activity to increase over the coming 12-months with optimism reaching its highest level since the record high which was reported in June.

These reports are available on the IHS Markit web-site at or on request from MTA.