Manufacturing demand weakens slightly


Jul 30, 2010

Overall demand for UK manufactured goods weakened a little in June, after a significant improvement in May, but total order book levels are still close to their long-term average, the CBI said.

Responding to the latest CBI monthly Industrial Trends Survey, 19% of manufacturers said that total orders were above normal, while 42% said they were below. The resulting balance of -23% is down slightly on the figure in May (-18%), but does not reverse the improving trend of recent months, and the balance is still quite close to the long-term average (-18%).

Export order books were also a little weaker compared with last month. Nevertheless, the balance of -2% shows that export orders are still considered to be broadly normal. This follows last month’s positive survey balance (+3%), the first since March 2008 (+3%), which was a considerable improvement on April this year (-16%).

Manufacturers still expect to raise output firmly during the next three months, with a net 15% expecting production to rise. This is broadly unchanged on May’s balance of +17%, and is well above the long-term average of +5%.

Inflationary pressures remain, but have eased a little, with a balance of 9% of firms expecting prices will go up, slightly lower than in the past three months. Makers of consumer goods no longer expect domestic prices to rise, while manufacturers of capital goods – such as plant & heavy machinery – continue to predict no change.

Ian McCafferty, CBI Chief Economic Adviser, said:

"Although demand for UK-made goods has weakened a little this month, the manufacturing sector remains on a path of recovery, with conditions much improved on just a few months ago. UK exports continue to be boosted by the weak pound and strengthening world trade, firms still expect a healthy rise in production in the coming months and inflationary pressures look to be easing a little."

Stock adequacy was similar for the third month running. A net 11% of firms reported that stocks are more than adequate to meet demand, which remains below the survey's long-run average.