Outlook for manufacturing output continues to deteriorate

Manufacturers' output expectations for the next three months are the weakest for seven years, the latest CBI Industrial Trends Survey has revealed. At the same time, the balance of firms expecting the price of manufactured goods to rise has barely changed since last month's 18-year high.

The outlook for manufacturing output has continued to deteriorate in August, following the first negative expectation since December 2005 in July. While 20% of firms in this month's survey expect their volume of output will increase in the coming quarter, 33% expect it will fall. The resulting balance of -13% is the weakest since December 2001 (-28%).

Demand for manufactured goods weakened for a second month after signs of improvement earlier in the summer. A net 13% of manufacturers judged total order book levels to be ‘below normal', matching April's 18-month low figure. Firms' perception of export orders was less negative, indicating that external demand is holding up somewhat better, though this month's balance of -9% is the lowest since May (-12%).

A balance of 31% of manufacturers expects prices will rise in the coming three months, slightly lower than the 18-year high recorded in July, but consistent with continued intense upward price pressures. The survey suggests after a long period of steep cost increases, cost pressures are still having an impact, despite recent falls in the price of oil.