CBI survey says manufacturers’ outlook for the next six months is ‘pessimistic’ |
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Published
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Fri, 24 Jun 2005 01:05
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The Confederation of British Industry released the findings of an industrial survey, which shows that factory order books have been hit badly in June and that these have fallen at their fastest pace for almost 2 years.
Consequently, manufacturers are disheartened and their outlook for the next six months was very pessimistic. Manufacturers’ orders fell to -25 in June, which is the lowest level since October 2003. This was slightly better than the May orders, which stood at -22. The export demand also continued to be below the average levels with demand from the euro area showing no signs of improvement.
Nick Brayshaw, chairman of the CBI’s manufacturing council, said, “Demand is subdued across the manufacturing sector with all the main industry groups reporting that order books are below normal. Manufacturers are facing a further squeeze on profit margins over the next three months as they remain unable to pass on costs incurred from rising prices of oil and metals.”
Almost 39 percent of 771 firms questioned in the Industrial Trends Survey admitted that their order books were below normal. Only 14 percent said they were above normal. The CBI said that the cost pressures would continue to be exerted due to the volatility in the oil markets.
There was also no significant movement in export order books and companies said that the output would fall over the coming three months. The CBI also predicted that average domestic prices are set to fall in the course of the next quarter.
The findings of the survey boosted the belief of analysts that the Bank of England’s monetary policy committee would be forced to affect a rate cut next month. Commenting on these findings, Howard Archer, chief UK economist at Global Insight, said, "Another very depressing survey - the disappointing news on the manufacturing sector just keeps on coming. Weak activity and squeezed margins do not bode well for employment and investment in the sector. Helping the case for lower interest rates, manufacturers' price expectations fell in June to be at their lowest level for 15 months, highlighting the difficulty that they are having in trying to pass on their higher input costs."
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