The weak global economy continues to hold back demand for manufactured goods with domestic and export orders both poor, claims a new CBI survey.
In the latest monthly Industrial Trends Survey 40% of respondents said orders were below normal while 16% said they were they were above. The balance of minus 24 is the same as in July.
Export orders were slightly better than in July but also well below normal. Stocks of finished goods have been run down over the past three months. The balance describing the adequacy of stock levels is now below the long term average, which indicates an end to destocking and could give some support to manufacturing output over the coming months.
As a result, the outlook for output growth continues to improve, and 32% of firms thought their output volumes would be up over the next four months while 16% thought they would be down. The balance of plus 16 is the highest since March 2000 and the seventh consecutive positive reading, following the steady trend of negative expectations throughout the second half of 2001.
There are significant differences between companies depending on their size and sector. Larger firms, those with over 500 employees, and those producing food, drink and tobacco and chemicals are the most optimistic. Firms in textiles, building materials and some parts of engineering continue to be more doubtful about the pace of recovery.
CBI chief economist Ian McCafferty says: “In recent months manufacturers have become more doubtful about the speed of the world economic recovery. Stock market volatility and poor economic news continue. Rising output expectations may only be because manufacturers are no longer reducing their stocks, as demand and orders remain weak. It is, though, encouraging that expectations of output growth are now spreading across a broad range of sectors.”
Price deflation for manufactured goods continues unabated. Average prices were up according to 13% of manufacturers but 23% said they were down, a balance of minus 10.