UK factories say outlook strong, but price pressures rising - CBI

LONDON (Reuters) - British manufacturers reported their healthiest order books in November since before the Brexit vote and they are their most confident about the near-term outlook in nearly two years, an industry survey showed on Tuesday.

Workers assemble cars at the plant for the Mini range of cars in Cowley, near Oxford, Britain June 20, 2016. REUTERS/Leon Neal/Pool

But the Confederation of British Industry also said manufacturers intend to raise prices at the fastest pace in almost three years, reflecting the sharp fall in the value of the pound since voters decided to leave the European Union in June.

The CBI said its monthly industrial orders balance improved to -3 in November, its highest level since June, and up sharply from -17 in October. Economists polled by Reuters had expected a more modest improvement to -9.

The CBI’s reading of export orders fell to -11 from -6, but expectations for output in the next three months jumped to +24 from +13 in October.

“It’s good to see manufacturers’ overall order books at healthy levels, and the outlook for output growth remaining robust as we head into Christmas,” CBI chief economist Rain Newton-Smith said.

“But the weak pound is beginning to make its mark, and prices are expected to rise, especially in the food and drink sector. On the flip side though, export orders remain above average,” she said in a statement.

Newton-Smith called on British finance minister Philip Hammond to show a “crystal clear focus” on infrastructure, investment and innovation when he announces the government’s first budget plans since the Brexit vote on Wednesday.

So far, Britain’s economy has fared better since the Brexit vote than almost all forecasts.

The Bank of England earlier this month scrapped its plan to cut interest rates below their already record low level and said it was adopting a neutral stance on monetary policy, partly due to the expected rise in consumer prices next year.

The monthly survey of 430 manufacturers was conducted between Oct. 26 and Nov. 11.

Reporting by William Schomberg, editing by Andy Bruce