UK manufacturers expect their output levels over the next three months to plummet at a rate not predicted since 1980, the CBI said today (Thursday).
Its latest Monthly Industrial Trends survey also revealed that demand for UK manufactured goods at home and abroad has fallen further below par in March, and that prices are again expected to fall over the coming quarter.
Ian McCafferty, CBI Chief Economic Adviser, said:
"The past six months have proved especially tough for many UK manufacturers, who have been hit by plunging domestic and global demand.
"Although firms have cut output aggressively in response to the recession, stock levels are still too high relative to expected demand.
"Manufacturers will take further action to reduce their stocks, leading to further sharp falls in output over the coming quarter."
Asked about their expectations for output volumes over the next three months, 8% of firms said they expected them to rise, while 56% said they would fall. The resulting balance of -48% was slightly worse than last month (-44%) and equalled the survey record low of September 1980 (-48%). This question was introduced into the 51-year old survey in February 1975.
A balance of 58% of respondents said that total order book levels were below normal, similar to February (-56%), and again marking the weakest demand for UK manufactured goods since January 1992 (-60%).
Export orders fell further below par, with a balance of 51% of firms reporting export order books below normal, which is the lowest since October 1998 (-55%), although it was equalled in November 1998 (-51%).
A balance of 10% of manufacturers expect to cut domestic prices over the next three months, which is a slightly slower pace than planned in the previous two surveys. These price falls are expected in the capital and intermediate goods sectors, while consumer goods manufacturers expect to be able to hold their prices in the next three months.
Although firms have slashed output in response to dropping demand the balance firms reporting stocks to be more than adequate to meet demand has risen to 31%, which is the highest since it was matched in January 1981 (31%).
1. A balance is the difference between the percentage of manufacturers reporting an increase and those reporting a decrease.
2. The March 2009 CBI Industrial Trends Survey was conducted between 25th February 2009 and 11th March 2009. 558 manufacturing firms replied.
3. During the survey period the pound averaged euro 1.11 and $1.41, while Brent Crude averaged $44.29 per barrel, compared with euro 1.11, $1.44 and $45.12 per barrel in the February survey period.
4. 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.