“Manufacturers can see a glimmer”

Posted on 20 May 2009 by The Manufacturer

The brutal business conditions caused by recession could be over for UK manufacturers, according to the latest Industrial Trends Survey from the Confederation of British Industry (CBI).

In the CBI’s survey for May, 17% of 575 firms said they expect 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 Lehman Brothers last September (a balance of -16%).

“After scaling back production very sharply at the beginning of the year, manufacturers can see a glimmer at the end of the tunnel,” said the CBI’s chief economic adviser, Ian McCafferty. “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,” he warned.

“With stock levels high relative to expected demand, manufacturers are likely to remain focused on running down their stocks further.”

A -56% balance for demand levels is broadly unchanged from each of the previous three months.

Export orders remain below par despite the relative weakness of Sterling. A balance of -46% is in line with the weak export demand seen in previous months (a balance of -34% in April and -51% in March).

A net balance of 13% of firms expect domestic prices to fall over the next quarter, although at a slower rate than in April (-20%).

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 twenty eight year high (a balance of 31%).