Not out of the woods yet

Hopes of a manufacturing pick-up suffered a set-back this month as order books weakened, reversing last month’s improvement, according to the CBI’s monthly industrial trends survey.

The survey, published last Thursday, will disappoint companies who were encouraged when total orders hit their best level for nine months in August.

In this month’s survey, 45% of firms said total orders were below normal, while 12% said they were above. The balance of -33% compares with -24% in August and -37% in July.

With mixed fortunes in the UK’s major international markets, export orders show no sign of overall improvement. 44% per cent of firms said export orders were below normal, 10% said they were above. The balance of -34% per cent compares with -32% in August and July.

Output is expected to remain flat over the coming quarter. Motor vehicle firms and the aerospace sector expect a sharp fall in output, while the food, drink and tobacco sector predicts a significant rise.

Ian McCafferty, CBI Chief Economic Adviser, said: ‘Some firms had hoped the worst was behind them, but manufacturers are not out of the woods yet. Order books have weakened once again and output remains flat. With few sustained signs of recovery, the manufacturing industry remains under severe pressure.’

More manufacturers expect to cut prices than to raise them over the next three months, continuing the pattern now seen for almost three years.

Weak demand has caused stocks to build up to the highest level for five months. Current stocks are more than adequate to meet demand and the balance of 21% compares with 16% last month.

Note: The Monthly Industrial Trends survey was carried out between 21 August and 10 September 2003 and 933 manufacturers responded. During the period, sterling averaged 1.44 Euros (DM2.82) and $1.58 compared with 1.42 Euros (DM2.77) and $1.61 in August’s survey.

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