Manufacturing outlook brightest for a year

In its latest industrial trends survey published yesterday (19 August) the CBI recorded 32% of UK manufacturers saying they expected the volume of output to fall over the next three months, while 27% said it should increase. Although the resulting balance of -5% represents a slight fall in output, it is the least negative prediction since June 2008. Demand remains very weak however, with a balance of 54% of manufacturers reporting that total order books are below normal. This was a slight improvement on July's 17-year low of minus 59% but marked the seventh consecutive month that orders have remained significantly below par. Export order book levels have also remained feeble, despite the relative weakness of Sterling, with a balance of 48% reporting them to be below normal. CBI Director-General Richard Lambert said: "Manufacturers are facing weak demand at home and abroad, and their order books continue to look anaemic. "More positively, expectations for manufacturing output over the coming three months are the least negative in over a year. This is partly because many firms have run their stock levels down quite aggressively over the summer, so some manufacturers are now looking to raise production. "It looks like destocking in the manufacturing sector may be coming to an end, which offers a further sign that the UK economy is starting to stabilise." Following heavy destocking over the past few months, a balance of 13% of firms said that stocks are more than adequate to meet demand, and stocks now stand at their most moderate level since July 2008 (13%). Manufacturers are still expecting to lower domestic prices over the next quarter, but the pace of these anticipated price falls has eased slightly. Responding to the survey David Raistrick (pictured), UK Manufacturing Leader at Deloitte, commented: "While the manufacturing sector still faces a very challenging environment, recent reports suggest that the industry may have passed the worst and is on the slow road to recovery. Production figures, while still negative, are the most positive they have been in over 12 months which should boost confidence in the sector. "Demand remained low last month however we are starting to see the emergence of some of the world's larger economies out of recession. At a time when sterling remains comparatively weak this could start to contribute to an export-led recovery for UK manufacturers. "Today's findings suggest that destocking may be a thing of the past and that manufacturers' output may have the chance to level-out or even increase. This is positive news and will hopefully result in a stabilisation of production."