Manufacturing output down

A CBI survey of 603 manufacturing firms shows that manufacturers’ output expectations for the next three months are the weakest for seven years.

Manufacturers’ output expectations for the next three months are the weakest for seven years, the latest Confederation of British Industry (CBI) Industrial Trends Survey reveals today.

At the same time, the balance of firms expecting the price of manufactured goods to rise has changed little since last month’s 18-year high.

The outlook for manufacturing output has continued to deteriorate in August, following the first negative expectation since December 2005 in July.

While 20 per cent of firms in this month’s survey expect their volume of output will increase in the coming quarter, 33 per cent expect it will fall. The resulting balance of -13 per cent is the weakest since December 2001.

Demand for manufactured goods weakened for a second month after signs of improvement earlier in the summer. A net 13 per cent of manufacturers judged total order book levels to be ‘below normal’, matching April’s 18-month low figure. Firms’ perception of export orders was less negative, indicating that external demand is holding up, though this month’s balance of -9 per cent is the lowest since May, which was -12 per cent.

A balance of 31 per cent of manufacturers expects prices will rise in the coming three months, which is slightly lower than the 18-year high recorded in July, but consistent with continued intense upward price pressures. After a long period of steep cost increases, cost pressures from food and other commodities are clearly still having an impact, despite recent falls in the price of oil.

Ian McCafferty, the CBI’s chief economic adviser, said: ‘Manufacturers are becoming more downbeat about forthcoming levels of activity but are still having to raise their prices due to the severity of recent cost increases.

‘Domestic conditions remain sluggish and the recent slowdown in the eurozone economies is starting to make conditions tougher for UK manufacturing exporters, although the weaker pound will offer some relief.’