The global economic slowdown has further depressed manufacturers’ order books and output growth expectations, according to the CBI.

The latest Industrial Trends Survey from the UK’s leading business organisation shows that export orders have been particularly hit, despite the fall in Sterling against the Euro and the US Dollar since the spring.

CBI South East Regional Director Malcolm Hyde said: “Manufacturers have been hit harder than expected by the economic slowdown with demand falling sharply, and they are not optimistic about the next three months, with output expectations having fallen further.

“But there are further signs that the Bank of England should consider cutting rates soon. Inflationary pressure is starting to fall, with fewer manufacturers now expecting price rises over the next three months than in our previous recent surveys. We believe the Bank should have room to reduce rates by half a point in November, and this new survey reinforces our call for a cut.”

However, price inflation is likely to slow, with falling expectations of price rises - which should provide scope for the Bank of England to cut interest rates in the coming months.
The Industrial Trends Survey also reveals that output expectations have fallen to a seven-year low. Over the next three months, 20 per cent of manufacturers expect their volume of output to be up, but 36 per cent expect it to be down, giving a balance of –16 per cent (where a balance is the difference between the percentage of manufacturers reporting an increase and those reporting a decrease). This is down from –13 per cent last month and the lowest since December 2001 (-28%).

Current total order books have also been hit by the slowdown, and 19 per cent of manufacturers say that their total order book is above normal, 44 per cent say it is below normal, giving a balance of –26 per cent, once numbers have been rounded. This is a fall from the balance of –13 per cent last month, and is the lowest figure since January 2006 (-28%).

Export order books have been particularly affected, with 14 per cent of manufacturers saying that their export order book is above normal, while 39 per cent say it is below normal, giving a balance of –25 per cent. This is a drop from the balance of –9 per cent last month, and is the lowest figure since October 2005 (-28%).

Expectations of price rises for the next three months are lower than in previous months. While 33 per cent of firms expect prices to be higher over the next three months, 56 per cent expect them to be the same, and 10 per cent expect a fall. This gives a balance of +23 per cent, which is lower than +31 per cent last month, and the lowest since February (+22%).