Weaker demand dampens manufacturers' expectations

Almost one in five reported total order books to be above normal, while 36% said they were below. The resulting rounded balance of -17% is in line with its long-run average but order book levels have softened relative to the past three months. However, export order books are holding up, with 16% of respondents stating that levels were above normal and 29% reporting they were below, giving a rounded balance of -12%, which remains above the long-run average. As a result of softer order books, output growth is expected to slow, with manufacturers anticipating that production will be broadly unchanged over the coming three months. Relative to April, manufacturers expect output price inflation to be slightly firmer in coming months, at a similar pace to earlier in the year. Ian McCafferty, CBI chief economic adviser (pictured), said: "Domestic demand for manufacturers' goods has eased this month, leading to an expectation among firms that growth in production will slow sharply over the coming quarter. "Export order books, however, are holding up, as UK exporters start to make inroads into high-growth markets. Nevertheless, if the crisis in the Eurozone continues, it is bound to have a dampening effect on sentiment in coming months."