UK manufacturers expect output to fall more slowly

A CBI survey reports that UK manufacturing firms expect the pace of decline in output to slow markedly in the next quarter, suggesting they believe the toughest phase of the recession may be behind them.

In the CBI's monthly Industrial Trends survey for May, 17 per cent of the 575 firms surveyed even said they expect the volume of output to increase over the next three months, against 34 per cent who anticipate a fall.

The resulting balance of -17 per cent is a marked improvement on the previous month's -32 per cent, and takes the measure back to where it was before the collapse of Lehman Brothers last September, at -16 per cent, the CBI said.

"After scaling back production very sharply at the beginning of the year, manufacturers can see a glimmer at the end of the tunnel," claimed Ian McCafferty, the CBI's chief economic adviser. "They still expect manufacturing activity to fall, but at a much slower rate over the next few months.

"However, this was another tough month for firms, with orders at home and abroad still at very weak levels. With stock levels high relative to expected demand, manufacturers are likely to remain focused on running down their stocks further."

Demand for UK-made goods remains weak with only 10 per cent of firms reporting above-normal total order books in May, while 66 per cent said they were below normal. Export order books remain below par this month too, despite the relative weakness of Sterling. 

Despite firms aggressively running down their stocks, levels remain high with a balance of 30 per cent reporting stocks more than adequate to meet demand, which was not far off March's 28-year high of 31 per cent.

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