High demand

The

August Industrial Trends Survey claims that demand for manufactured goods remains high, but firms’ expectations for output growth are noticeably weaker than they were in the first half of 2007.

After five months of strong expectations for increasing output, the balance of manufacturers forecasting growth dipped to +10% in July and has now been followed by an only slightly more positive balance of +13% in August. The figures contrast with the average balance from February to June of +22%.

However, demand remained strong this month, with an increased balance of +9% of firms reporting that their order books were above normal. Statistically this is the highest balance since 1995 (just above June’s balance of +8%) but there are marked differences between the manufacturing sectors.

Firms producing capital goods, such as industrial machinery, engines and agricultural equipment, said business was brisk with a very strong balance of +30% reported ‘above normal’ order books. Consumer goods producers enjoyed a return to healthy order book levels, from July’s balance of -9% to +8% in August. However, manufacturers of intermediate goods, including components, parts and building materials, suffered a deterioration in demand, with last month’s balance of -3% taking a further knock to -11%.