Output at small and medium-sized manufacturers grew at the fastest rate in 33 years in the three months to July, but there are increasing concerns about inflation and shortages in staff and materials, according to the CBI.
The volume of new orders increased at the quickest rate since the employers’ group started the survey in October 1988, thanks to soaring domestic orders and the quickest export orders growth since January 2019.
Employment numbers also grew at the strongest pace on record, the CBI’s survey of 234 smaler manufacturers said.
Growth in business optimism slowed slightly compared with the previous three months but remained strong, while sentiment about export trading stabilised after five quarters of decline, the business group said.
Respondents predicted that output volumes would grow at a similarly strong rate over the next three months, although total new orders were expected to increase at a slightly slower pace. This reflected “slightly slower domestic orders growth and steady export orders growth”, the CBI said.
Advertisement
There were positive signs on investment intentions, with spending plans for plant and machinery improving to their strongest since 1988. However, the proportion of businesses reporting concerns about the availability of skilled labour as a factor likely to limit output was at a joint-record high and the proportion citing other labour or materials shortages remained close to respective record highs.
There were “severe cost and price pressures”, the CBI said. Average costs rose at their quickest pace on record as manufacturers reported record domestic price growth and the fastest increase in export prices in four years.
Alpesh Paleja, the CBI’s lead economist, said: “The outlook further ahead is positive, as businesses expect activity to continue to grow strongly. However, mounting staff shortages, rising cost pressures and shortages of raw materials due to supply chain disruptions are posing a real challenge to the outlook.”
