Order books and factory output are being boosted by the tumbling oil price, the CBI has said in its latest health check of UK industry.
The employers’ organisation said there had been a bounce back in manufacturing after the lull at the end of 2014, helped by the halving of the cost of crude during the second half of the year.
Of the 522 firms questioned in the CBI’s monthly industrial trends survey, 36% said they expected production to go up over the next three months and 12% predicted a decline. The rounded balance of +25 percentage points in February was up from +13 points in January.
Twenty-six per cent of companies said order books were above average for the time of year, against 16% who said they were below normal. The balance of + 10 points was above the long-run average of – 16 points, the CBI said.
Despite the lower cost of energy, more firms expect to raise prices than cut them over the coming months. More than three quarters of companies (76%) said they expected to peg their selling prices, with 16% saying they would increase and 8% planning to lower them. The balance of + 8 points compared to -6 points last month.
Rain Newton-Smith, the CBI’s economics director, said: “Our manufacturers have more of a spring in their step this month, regaining some of the momentum lost towards the end of last year.
“The drop in oil prices is good news for the manufacturing sector in the UK, bringing with it lower operating costs, but North Sea producers are clearly suffering.
“Export orders picked up significantly, to a level not seen for six months, but uncertainty over prospects in the eurozone will continue to weigh on export demand. So, it’s imperative we continue to help manufacturers sell their products and services into high-growth markets around the globe.”
