The latest CBI Industrial Trends Survey has shown the outlook for manufacturing output in the next three months to be the weakest for nearly 30 years.
Order books are still suffering in the slowdown. Sixteen per cent of those surveyed say their total order book is above normal, while 53 per cent say it is below normal, giving a balance of -38 per cent.
Export order books also reflect the overall slowdown, with 44 per cent of firms recording below normal volumes (a balance of -31 per cent).
Due to the weak demand, manufacturers’ inventories have built up to their highest level since December 2001, with a balance of +25 per cent of firms seeing their present stock levels as more than adequate to meet demand.
Output expectations are their lowest since 1980. Fourteen per cent of manufacturers expect their volume of output to rise over the coming three months, but 56 per cent expect it will fall. The resulting balance of -42 per cent is in fact the lowest since September 1980 (-48 per cent).
“The outlook for manufacturers has deteriorated considerably since the banking crisis took a turn for the worse in October. Expectations for output are now the gloomiest in 28 years, while firms’ order books remain weak,” said Ian McCafferty, the CBI’s chief economic adviser.
“With a sharper and more prolonged UK recession in prospect, conditions are going to remain tough for some time. A slowing global economy, particularly in the eurozone, makes the immediate benefits of a weak pound fairly muted for exporters. But the weakening in factory gate prices will feed through to declining inflation in coming months, giving the Bank of England room for further significant rate cuts.”