Engineering news
Manufacturing production edged downwards during the three months to October, marking the first decline in the past two years, according to the CBI Quarterly Industrial Trends Survey. However, firms have signalled that they expect overall conditions to stabilise over the next quarter.
New export orders fell at the fastest pace in three years, possibly down to the continued strength of Sterling, with 15% reporting an increase in export orders, but 33% signalling a decrease.
Total new domestic orders reduced over the quarter for the first time since April 2013 and manufacturers’ optimism about both their business situation and export prospects for the year ahead fell to the greatest extent since October 2012. The resulting balance for export orders (-17%) signalled a faster decrease in orders than the historic average (-7%).
Total unit costs stabilised over the three months to October, but output prices fell further and are expected to do so again over the next three months.
The study highlighted that competitiveness abroad has deteriorated with a third-consecutive large fall in competitiveness in the EU (balance of -19%). Firms are also concerned about political and economic conditions abroad and their impact on export orders. Worries about price competition rose and the number of manufacturers citing uncertainty about demand as a constraint on investment was the highest in two years.
Key findings of the survey noted that 22% of businesses reported an increase in total new order books and 30% a decrease, giving a balance of -8%, the lowest since October 2012 (-13%). 20% of businesses also reported an increase in domestic orders, with 31% noting a decrease. The balance for domestic orders (-11%) was below the long-run average (-5%), the lowest since April 2013 (-14%).
Rain Newton-Smith, CBI director of economics, said: “Manufacturers have been struggling with weak export demand for several months, because of the strength of the pound and subdued global growth. But now they’re also facing pressure back home as domestic demand is easing.
“While on balance firms expect orders to stabilise next quarter, it’s disappointing that firms are having to scale back their investment in innovation.
“Over the longer term, strong investment in innovation and skills is vital to boosting our performance in exports, enhancing our manufacturing growth and improving productivity. It’s crucial that government acts decisively to protect spending in these areas as part of the upcoming Comprehensive Spending Review.”
The 463 manufacturers surveyed predict that overall manufacturing conditions will stabilise in the next three months, with a small rise in output, although export new orders are expected to edge down slightly further. In this period, 21% of manufacturers expect total new orders to increase, and 20% expect them to decrease, giving a balance of +1%, the lowest since January 2012 (-2%).
Domestic orders are also expected to stabilise, with 19% expecting an increase, and 19% a fall, giving a rounded balance of -1%. However, new export orders are expected to continue falling at a rounded balance of -5%, the lowest since January 2012. 22% of firms anticipate a rise in output volumes, and 18% a fall, giving a rounded balance of +5% - the lowest since October 2011. 15% expect employment to increase, and 23% expect it to decrease, giving a balance of -8% - the lowest since July 2011.