The CBI’s latest monthly Industrial Trends survey, published today, shows that manufacturers’ output expectations are now at their weakest for 18 months.
According to the report, 25 per cent of firms expect output to fall over the coming three months, while 19 per cent expect it to rise. The balance of minus six per cent is the first expected fall in output since November 2003 and the largest expected fall since June 2003.
More positively, the level of order books has improved following two poor months, though it remains slightly below normal. Twenty-six per cent of firms said total order books were below normal this month, while 22 per cent said they were above. The balance of minus four per cent compares with minus 16 per cent in November, which was the weakest result recorded since January this year.
Export order books also edged up from November’s nine-month low. Thirty per cent of firms said export orders were below normal, while 15 per cent said they were above. The balance of minus 15 per cent compares with minus 21 per cent in November and minus 11 per cent in October. Going forward, firms will be concerned about the impact of recent and prospective moves in the sterling-dollar exchange rate.
Stocks of finished goods remained stable this month and for the second consecutive survey companies expect domestic prices to increase over the coming quarter.
Doug Godden, CBI Head of Economic Analysis, said: “Manufacturers have been striving for sustained recovery and it is disappointing that firms now expect output to fall for the first time in over a year. Companies will, however, be pleased that order books have improved this month and will hope that the new year brings a change of fortune.
“Interestingly, cost pressures have eased slightly this month, with oil prices now eight per cent lower than in November. Firms are more confident about being able to increase prices than they were earlier in 2004 and will hopefully enjoy some respite from the recent intense squeeze on profit margins.”