CBI expects sector to cut output over coming three months but reports exports holding up despite eurozone crisis
Shrinking order books will force Britain’s manufacturing sector to cut output over the next three months, the CBI said.
The employers’ organisation blamed weak demand for the worsening business climate for industry but said that exports were so far holding up despite the fresh turmoil in the eurozone.
In its monthly snapshot of activity in UK factories, the CBI found that only 19% of firms reported order books above normal against 36% who said they were below normal. The balance of -17 points compared with -8 points in April.
A quarter of companies questioned (25%) said they planned to increase output while 28% said they expected production cutbacks. The balance of -3 points was a marked turnaround from April when a balance of +24% forecast rising output.
Ian McCafferty, the CBI’s chief economic adviser, 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.”
Howard Archer, UK economist at IHS Global Insight, said: “The CBI industrial trends survey for May shows an appreciable loss of momentum in the manufacturing sector, thereby adding to concerns about the economy’s ability to return to growth in the second quarter.”