Dropping exports hit manufacturing sector: CBI |
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Sat, 24 Sep 2005 00:35
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LONDON: Soaring oil prices have struck a double blow to the manufacturing sector, according to a survey by the Confederation for British Industry. On the one hand the sector faces rising costs and squeezing margins; and on the other it is struggling to pass on the increased cost to the buyer, especially as export orders are declining.
The survey’s latest monthly industrial trends show that 4 out of 10 manufacturers found total order books below normal. The downturn has caused much concern among the group who had predicted a rebound for the industry.
A senior economist said the rising price of oil and high transportation costs are likely to further reduce profits for most manufacturers. Freight costs had gone up by a third compared with last month, and oil prices had sky-rocketed 58 percent higher than last year reaching an average price of almost $65 a barrel in September.
Additionally, orders from the Eurozone – destination for over half of total British exports, had been affected by buoyant oil prices over the last few months. Export balance had declined to their lowest since January. The export figures have slid from -17 in August to -25 in September. A significant number of manufacturers believe they may have to cut the prices of their products rather than raise them.
These numbers from the CBI report have caused some concern among the manufacturers who fear it could be the start of a trend for the coming months. The Bank of England is also likely to reconsider its decision earlier this month, to keep interest rate on hold at 4.5 percent. It is likely to see more calls for further rate cuts.
Besides oil, the price of copper has also contributed to the rising cost. Copper being commonly used in electrical goods and construction factored in the dilemma of manufacturers: in the last week alone, price of copper rose over 8 percent to peak at £2,095 per tonne.
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