Orders fall as costs rise

Manufacturing orders fell further below normal in June, with order books at their weakest since October 2003, according to the CBI's monthly Industrial trends Survey, published today.

Cost pressures remain intense. Oil prices have risen by more than two dollars a barrel since the previous survey, which is 46 per cent higher than a year ago. Metal prices are also 17 per cent higher than the corresponding period last year.

The pressure on profit margins is expected to intensify as firms doubt that they will be able to pass on cost increases to their customers. Domestic prices are expected to fall over the coming quarter, with expectations at their weakest since March 2004. Prices are expected to return to the downward trend of the past seven years, following an 18-month pause.

The survey shows 39 per cent of firms reporting their order books are below normal, while 14 per cent say they are above normal. The negative balance of minus 25 per cent is the weakest since October 2003. Over the past three months the balance has averaged minus 24 per cent in contrast to an average of minus eight over the previous 12 months.