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Manufacturing recovery slows as order books weaken - CBI

By Abigail Townsend

Date: Tuesday 22 Sep 2020

Manufacturing recovery slows as order books weaken - CBI

(Sharecast News) - The manufacturing sector's nascent recovery appeared to slow in September, after order books stalled for the first time since April, an industry survey showed on Tuesday.
The latest CBI Industrial Trends Survey found that output volumes in the three months to September fell at a slower pace than in August.

But for the first time since April, there was no improvement in overall order books, with both total and export order far weaker than long-run averages.

Anna Leach, CBI deputy chief economist, said: "While it's good to see that output volumes once again fell at a slower pace this month compared to August, it is disappointing to see the modest improvements in order books stall, with demand at a still weak level.

"As manufacturing firms continue to battle against headwinds from a resurgence of the virus, weak global demand and uncertainty over our trading relationships, the government must step up its support."

In the three months to September, output volumes were down 20%, a significant improvement on August's 46% decline. Output dropped in 10 of the 17 sub-sectors, with the biggest falls seen primarily in motor vehicles and transport equipment.

The decline in output is expected to ease further in the next three months, according to respondents, to -6%.

But total order books slid 48%, a deterioration on August's 44% fall and well below the long-run average of -14%. It also missed consensus for a 40% decline.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "We doubt the recovery in the manufacturing sector has gone into reverse, as the decline in total orders balance suggests. This balance is not seasonally adjusted and it has fallen by an average of four points in the previous ten Septembers.

"Nonetheless, the recovery appears to be losing momentum. Strong growth in output over the summer likely was partly due to firms shifting work backlogs that had amassed during the lockdown. While demand for consumer goods is strong, it is very weak for capital goods, as corporates are holding back from large investments in response to Covid-19 and Brexit.

"A sustained recovery in output to pre-Covid levels still is not in sight."

The CBI Industrial Trends Survey was conducted between 26 August and14 September, with 277 manufacturing firms responding.

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