Domestic and export orders for small and medium-sized manufacturers continued to fall in the three months to January, according to the CBI, and production contracted for the third consecutive quarter.
However, both domestic orders and output are expected to increase in the coming three months.
The CBI’s latest quarterly SME Trends Survey, which had 347 respondents, showed that total new orders fell slightly (-5%), for the second quarter running. This was driven by falls in both domestic orders (-6%) and export orders (-9%), although both declined at a slower pace than the previous quarter.
SMEs expect total new orders to grow over the next three months (+9%), likely to be driven by anticipated growth in domestic orders; in contrast, export demand is expected to be broadly flat.
Output continued to fall (-8%), failing to meet expectations of modest growth, but it is expected to increase next quarter (+7%).
With less activity over the last three months, numbers employed in the sector fell slightly (-4%), for the first time in three years. But SMEs anticipate an increase in headcount in the next quarter (+11%).
Anna Leach, CBI head of economic analysis, commented: “Better news on the domestic front is expected, with output and domestic orders set to rise modestly. But there is little sign of improvement in export prospects, and uncertainty over demand continues to weigh on investment plans.”
Furthermore, firms’ plant and machinery investment intentions for the year ahead turned positive (+4%) for the first time since April 2012 (+13%). However, more firms believed that uncertainty over demand would limit capital spending.
