Manufacturing output bounced back from a dip in the last quarter, according to a closely followed survey.
The industrial trends survey by the Confederation of British Industry (CBI) showed overall output rising, with a balance of 21 per cent of firms reporting an increase for the quarter to January. The rise was driven by stronger domestic demand, which hit its strongest since June 2014, while exporters continued to enjoy the relative weakness of sterling as orders hit their highest since 2011.
However, the CBI warned that capacity pressures are at their most intense since April 1989, with more firms said order books are above average than at any time since 1988.
Rain Newton-Smith, the CBI's chief economist, said: “It’s good to see manufacturing going from strength to strength, with growth up and the buoyant global economy boosting export orders. But the past depreciation in sterling continues to leave its mark on firms’ costs and margins. With expectations for factory gate price inflation at their highest in 30 years, the pressure on consumer prices looks set to persist.
“Capacity pressures are ramping up and skill shortages are a big concern, underlining the importance of establishing a future immigration system that provides companies with access to talent and labour."
More firms – a balance of 29 per cent – said they were concerned skills shortages will constrain their activity than at any time since 1974. The long-term average level is only 13 per cent.