Bleak expectations

Manufacturers’ output expectations in the next three months are the weakest for nearly 30 years, according to the latest

Industrial Trends Survey.

The economic downturn continues to have an impact on domestic orders with only 16 per cent of firms reporting above-normal order books, while 53 per cent recorded a drop in figures. This gives a balance of -38 per cent, compared to last month’s figure of -39 per cent.

Export order books also reflected the slowdown, with 13 per cent reporting above normal volumes compared with 44 per cent below average. Last month’s balance of -32 per cent was the weakest for five years.

The fall in demand has resulted in the highest levels of excess stock since December 2001. A balance of 25 per cent reported that current stock levels were more than enough to meet demand.

Output expectations are at their lowest since 1980. In contrast to four months ago, 56 per cent of manufacturers expect their output to fall over the coming three months, with only 14 per cent predicting a rise.

Manufacturers do not expect to increase prices. Of those surveyed, 20 per cent predict they will rise, while 58 per cent believe that prices will remain the same.

Ian McCafferty, the CBI’s chief economic adviser, said: ‘The outlook for manufacturers has deteriorated considerably since the banking crisis took a turn for the worse in October. Expectations for output are now the gloomiest in 28 years, while order books remain weak.

‘With a sharper and more prolonged UK recession in prospect, conditions are going to remain tough for some time. A slowing global economy, particularly in the euro zone, makes the immediate benefits of a weak pound fairly muted for exporters. But the weakening in factory gate prices will feed through to declining inflation in coming months, giving the Bank of England room for further significant rate cuts.’