Manufacturing downturn continues as firms warn selling prices will creep up
Manufacturing output dropped faster than expected in the three months to September in a further sign of declining economic activity while selling prices are expected to edge up in the coming months.
According to the Confederation of British Industry’s (CBI) industrial trends survey, the balance of factories reporting a rise in output versus a fall was -10 per cent in the three months to September.
Although this was an improvement on the -19 recorded in the three months to August, it was still lower than expected.
Output fell in nine out of 17 sub-sectors in the three months to September, with particularly sharp declines in transport equipment, chemicals and paper.
Manufacturing in almost all major economies has been contracting for many months now. Slow growth in China has dented demand while consumers have increasingly prioritised spending on services rather than goods post-pandemic.
Things are unlikely to get better any time soon with firms surveyed suggesting output will be stagnant over the next three months as firms struggle with lower than average order books.
Order books were below normal and weaker than the month before, falling to -18 per cent from -15 per cent. Export order books in particular were weaker, falling to -23 from -18 the month before.
Anna Leach, CBI deputy chief economist, said: “With order books having been below their long-run average for eight out of the last nine months, manufacturers see little prospect of a recovery in the final months of the year.”
The survey also showed that manufacturers are expecting selling prices to pick up again in the three months to December, breaking a run of eight consecutive months in which expectations for selling price inflation have eased.
However, barring last month’s survey, selling price expectations remain at their weakest since early 2021.
The CBI survey adds to a chorus of increasingly gloomy surveys on the UK economy. Some analysts think the UK may already be in recession after GDP contracted 0.5 per cent in July.
S&P’s survey of private sector activity, out earlier today, showed a sharp fall in September led by plummeting activity in the UK’s service sector. Experts suggested that a recession looked increasingly likely.
Leach said the government had an “important opportunity” in the Autumn statement to bring about a “sustainable recovery”.
The government should have a “broad focus on tax incentives for investment, support with upskilling workers and help for firms to make the most of green growth opportunities,” Leach said.