The survey, which involved 422 SME manufacturers, reported healthy growth in total new orders, underpinned by a strengthening in domestic demand.
Nearly a third (32%) said their domestic orders were up, while 20% said they were down – giving a balance of +12%. Meanwhile 23% said export orders rose over the three months to January and 19% said they fell - leaving a balance of +4%.
CBI said that firms expect broadly similar domestic order growth over the next quarter (+13%) and anticipate that export orders will strengthen (+15%).
Output also continued to grow, headcount increased, and hiring intentions for the next quarter are firm, CBI added. In addition, 29% of SME manufacturers are more optimistic, while 14% are less optimistic – giving a rounded balance of +16%.
However, it warned that pricing pressures are gaining traction, with average unit costs rising at the fastest pace since April 2011 (+37%). Both domestic and export output prices increased sharply - +14% and +23% - and companies plan on raising them faster in the next quarter.
Alpesh Paleja, CBI principal economist, said:“Activity among SME manufacturers is ticking along nicely, with new orders growth reaching a two-year high. The pick-up was largely shouldered by domestic demand with exports yet to see any material boost from the weakness in sterling.
“But the lower pound is clearly stoking cost pressures, which in turn is pushing up factory gate prices. This will eventually feed through to prices at the till, so further rises in consumer price inflation are on the cards.”
