Manufacturing output expected to fall further as demand remains weak - CBI
UK manufacturers reported a further slight weakening in total order books in December, while export orders remained well below their long-run average, the CBI said today.
As a result, firms expect production to fall over the coming quarter, according to the CBI’s latest monthly Industrial Trends Survey.
Of the 434 manufacturers responding, 18% reported total order books to be above normal, while 41% said that they were below. The resulting survey balance of -23% is the lowest since October 2010 (-28%).
Export demand also remained depressed. While 12% reported export order books to be above normal, 44% said that they were below. The resulting balance of -32% is the lowest since January 2010 (-33%) and still well below the long-run average (-21%).
In line with weakened order books, manufacturers expect to reduce production over the next three months. While 24% of firms believe output will rise in the next quarter, 32% expect to cut back on production. The resulting rounded balance of -8% is the third consecutive negative survey balance.
Ian McCafferty, CBI Chief Economic Adviser, said:
“Conditions in the UK manufacturing sector remain difficult, with demand both at home and abroad subdued. The weaker export performance no doubt reflects on-going instability in the Euro area, our biggest export market, and its knock-on impact on prospects for the real economy.
“A clear and orderly resolution to the crisis remains essential to prevent further adverse effects on both UK manufacturing and the wider economy, and to lift business confidence.”
Weak demand and output prospects have kept expectations for output price inflation muted. While 22% of manufacturers predict that they will raise output prices over the coming quarter, 15% expect to lower prices. The resulting balance of +7% is slightly higher than in recent months, but still significantly lower than stronger expectations seen in the first half of 2011.
Stock adequacy remained broadly in line with its long-run average (+14%) in December. A balance of +16% of firms reported stocks to be more than adequate for the second consecutive month.
Note to Editors:
1. The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. With offices across the UK as well as representation in Brussels, Washington, Beijing and Delhi, the CBI communicates the British business voice around the world.
2. The December 2011 CBI Industrial Trends Survey was conducted between 24 November and 7 December. 434 manufacturing firms replied.
3. During the survey period, the pound averaged euro 1.17 and $1.56 and Brent Crude $109.46 per barrel, compared with euro 1.16, $1.60 and $112.10 per barrel in the November survey period.