Manufacturing remains upbeat in spite of financial turmoil

Manufacturing News, Source : TheManufacturer.com
Published : 20 Sep 2007 12:36

Manufacturing continues to weather the turbulence in the financial markets, with healthy order books, and an optimistic outlook for output growth.

CBI's monthly Industrial Trends survey, published today, shows that while 23 per cent of companies reported their order books to be below normal, 29 per cent reported above normal levels. The balance of +6 per cent is lower than last month's 12 year high of +9 per cent, but remains higher than average for the first half of 2007.

This upbeat figure was underpinned by strong demand for capital goods - a balance of +17 per cent of firms reported order books were above normal. In contrast, a balance of +1 per cent of firms in the intermediate and consumer goods sectors cited ‘above normal' levels.

Looking ahead to the next three months, the balance of firms expecting higher output volumes has increased to +17 per cent. After the modest slowdown of July and August, this represents a return to the healthy growth rate of earlier in the year.

Despite a continued strong pound, manufacturers report that overseas demand remains healthy. By a balance of just -2 per cent, firms said export order books were below normal, but this remains significantly above the long term mean for this question (-22 per cent). Demand was greatest for intermediate goods, such as components and unfinished products. A balance of +9 per cent of manufacturers in this sector reported fuller export order books than normal, compared with -8 per cent and -4 per cent for capital goods and consumer goods respectively.

The expected rate of increase in manufacturers' output prices remains similar to that over the summer, and slightly slower than earlier in the year. A balance of +16 per cent of respondents said they expected to increase prices over the next three months.

The level of stocks fell back slightly relative to expected demand, but they are still seen as at least adequate. Eighty-four per cent of manufacturers said their stocks were adequate or more than adequate.

The CBI's chief economic adviser, Ian McCafferty, said: "This survey took place against the backdrop of severe turbulence and uncertainty in the financial markets, and rising interest rates for borrowing. Nevertheless the manufacturing sector has continued to show encouraging signs of growth and the wider economy beyond the financial markets is in good shape.

"Demand for goods remains strong with manufacturers saying their order books are bulging and exports holding up well too, despite the continuing strength of the pound. Expectations for the coming three months suggest this healthy situation will continue."

Comments on this story

click here to add a comment