A reasonable outloook

In-Depth

Overseas demand for UK manufactured goods eased in December from November’s high level, but total order book levels were little changed, according to the CBI’s latest industrial trends survey.

A balance of five per cent of manufacturers reported export orders to be ‘below normal' - a weakening from November's 11-year high, when a balance of three per cent reported orders to be 'above normal'.

The weakening was focussed in the capital goods sector. However, total order book levels remain well above their long-term average at a balance of minus five per cent, a slight improvement on November and a return to the levels of the early autumn - suggesting some revival in domestic demand for manufactured goods over the last month.

An improvement in the consumer goods sector offset a weakening in capital goods. The level of stocks relative to expected demand has risen, with a balance of +11 per cent saying they were more than adequate.

This remains below the long run average, indicating that stock levels are not a current concern. The rate of output growth is expected to pick up slightly over the next three months, with a balance of +11 per cent expecting output to increase, although this is still a slower pace of growth than recorded through the summer.

Manufactured output prices are expected to rise rather more slowly over the next three months. A balance of +8 per cent now expect to increase their prices, against +19 per cent in November.

Price rises are concentrated in the intermediate goods sector, with capital and consumer goods sectors expecting prices to remain flat.

Ian McCafferty, the CBI's Chief Economic Adviser, commented: ‘The recent sharp rises in the value of the pound against the dollar are clearly affecting export order books, and any sustained appreciation of sterling will be of concern to exporters.

‘But total order books are still at reasonable levels, further growth in output is predicted, and some of the price pressures from soaring energy costs are easing. While not as upbeat as during the summer, the short term outlook remains reasonable.’