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Manufacturing recovery weakens slightly in June

Manufacturers&#39 orders weakened slightly in June but not enough to suggest a threat to the sector&#39s recovery, says to the CBI&#39s Monthly Industrial Trends survey published yesterday.

Firms said total order books were marginally below normal in June, having returned to normal levels in May. However, June&#39s result was not sufficiently weak to indicate a marked change in the improving trend reported over the previous eight months. Nearly a quarter of firms said order books were above normal, 28% said they were below. The negative balance of minus 6% compares with plus one per cent in May.

Export orders remained broadly unchanged in June – only marginally more below normal than May, when the balance was at its least negative since February 1996.

Relative to May, firms expect output to moderate slightly over the next three months. But their expectations remain broadly in line with those of the previous three months and above the long-term average.

Expectations for prices were moderately positive for the third consecutive survey following persistent price deflation in recent years.

Stocks remain under control with 65% of firms reporting levels were adequate. The positive balance of plus five per cent of firms reporting that stocks were more than adequate compares with a balance of plus 8% in May.

Capital goods manufacturers reported order books broadly normal for June, having been well above normal last month. Producers of consumer and intermediate goods continued to report orders below normal.

Ian McCafferty, CBI chief economic adviser, says: “This latest snapshot of manufacturing suggests that the underlying trend of slow, steady improvement in orders and output is continuing, even though both weakened slightly relative to May.”

“In general, manufacturers are benefitting from the improving conditions globally, but many continue to struggle with both the level of sterling and the impact of rising interest rates on their costs.”

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