Manufacturing business optimism in the U.K. rebounded considerably in the quarter to January, at the fastest pace since April 2014, according to the CBI. In the meantime, the export confidence continued to drop, but was markedly less gloomy compared to the previous quarter.
Investment intentions also rebounded after especially after particularly weak expectations in October, with a record proportion of companies expecting to authorise capital expenditure in order to expand capacity. However, a record proportion of manufacturers were worried that a shortage of labour might restrict investment spending over the coming year.
The rebound in manufacturers’ confidence called into question the poor activity over the quarter. Output volumes dropped in the three months to January at a quick pace to last month, largely reflecting a sharp decline in motor vehicles output. This marked the eighth consecutive month of flat or falling output volumes. Total new orders dropped at the most rapid pace since the financial crisis, reflected by a similarly fast decline in domestic orders. Nevertheless, orders and output are likely to rebound a bit in the coming quarters.
“With business optimism improving at its fastest pace since 2014 and some of the squeeze on investment plans lifting, it’s clear manufacturers are entering the new year with a spring in their step. Firms are now planning to invest more in plants and machinery, which will ultimately help increase capacity and output”, said Anna Leach, CBI Deputy Chief Economist.
