Toughest may be over for manufacturing

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The toughest phase of the recession may be over for the UK’s manufacturing firms who expect the pace of decline in output to slow markedly in the next quarter.

In the CBI’s monthly industrial trends survey for May, 17% of the 575 firms surveyed said they expected the volume of output to increase over the next three months, against 34% who anticipate a fall. The resulting balance of -17% is a marked improvement on the previous month (a balance of -32%), and takes the measure back to where it was before the collapse of the US bank Lehman Brothers last September. The CBI’s chief economic adviser Ian McCafferty (pictured) said: “After scaling back production very sharply at the beginning of the year, manufacturers can see a glimmer at the end of the tunnel. They still expect manufacturing activity to fall, but at a much slower rate over the next few months. “However, this was another tough month for firms, with orders at home and abroad still at very weak levels. “With stock levels high relative to expected demand, manufacturers are likely to remain focused on running down their stocks further.” Demand for UK-made goods remains weak with 10% of firms reporting above normal total order books in May, while 66% said they were below normal. Export order books remain below par this month, despite the relative weakness of Sterling. 12% of firms said they were above normal, 58% said they were below normal. Despite firms aggressively running down their stocks, levels remain high with a balance of 30% reporting stocks more than adequate to meeting demand, which was not far off March’s 28-year high.