Through the worst

British manufacturers expect the pace of decline in output to slow in the next quarter, according to the latest industrial trends survey from the CBI.

The survey suggests that firms believe the toughest phase of the recession is behind them.

Out of 575 firms surveyed, 17 per cent said they expect the volume of output to increase over the next three months, against 34 per cent who anticipate a fall.

The number is an improvement on April’s figures and it takes the measure back to where it was before the collapse of Lehman Brothers last September.

‘After scaling back production very sharply at the beginning of the year, manufacturers can see a glimmer at the end of the tunnel,’ said Ian McCafferty, the CBI’s chief economic adviser. ‘They still expect manufacturing activity to fall, but at a much slower rate over the next few months.’

McCafferty noted that the past month was a tough month for firms, with orders at home and abroad still at weak levels.

The CBI reports that demand for UK-made goods remains weak with only 10 per cent of firms reporting above-normal orders in May. About 66 per cent of firms said orders were below normal. The resulting balance of -56 per cent is almost unchanged from each of the previous three months.

Despite the relative weakness of sterling, export order books remain below par this month. Only 12 per cent of firms said they were above normal, 58 per cent said they were below normal.

The CBI also reports that 13 per cent of firms expect domestic prices to fall over the next quarter, although at a slower rate than in April.

The survey notes that while firms are aggressively running down their stocks, levels remain high with approximately 30 per cent of firms reporting stocks are more than adequate to meet demand.