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Government optimism not shared by CBI24 April 2009 Demand for UK manufactured goods slumped at its fastest rate in 30 years in the past three months as output saw a record decline, the CBI (Confederation of British Industry) has revealed.
Its latest quarterly Industrial Trends survey also revealed that firms expect the pace of this decline will moderate slightly in the next three months and, for the first time in seven quarters, business sentiment fell at a slower rate.
John Cridland, deputy director general, remarks: "The government has a more optimistic view than the CBI. We expect 2009 to be pretty flat. But it's all speculation - time will tell. Growth in 2010 is improbable, and the amount of revenue that the [recent] tax changes bring in is modest."
In the last quarter demand plummeted, with 60% of firms reporting a fall in the volume of new orders compared with the previous quarter, and 13% reporting an increase. The resulting balance of -47% is the lowest in nearly 30 years, since October 1980 (-61%).
The very sharp falls in demand have resulted in continued job losses. Employment fell at the sharpest rate (a balance of -48%) since October 1991 (-49%), and firms expect to continue making job cuts, albeit at a slightly slower pace next quarter (-39%). Based on the survey, the CBI estimates that 62,000 jobs were lost from the sector in Q1 and that 51,000 will be lost in Q2, bringing the total employed in manufacturing to 2,666,000.
Ian McCafferty, the CBI’s chief economic adviser, comments: “The first quarter of 2009 was extremely tough for UK manufacturers but this survey shows firms hope that the worst may be behind them, with the pace of decline slowing slightly.
“Firms have run down their stocks more sharply this quarter, as demand and output have collapsed, but stock levels are still considered too high. Job losses have been steep, and training and investment plans scaled back significantly.
“However, firms are hopeful that the pace of decline in manufacturing activity will moderate slightly in the next three months, and general sentiment is falling less rapidly for the first time in seven quarters.”
Domestic demand fell slightly faster this quarter than in the three months to January, with balances of -52% and -50% respectively, though both these figures are the weakest since 1980. In the next three months this rate of decline is expected to ease (a balance of -40%).
The volume of new export orders declined more rapidly in the last three months than firms had hoped, with a balance of -39% some way below the expected -27% and the weakest figure since October 1998 (-44%). Firms still expect export orders to fall next quarter, but at a more moderate pace (-18%).
Manufacturing output fell faster than expected in the past quarter, with the balance of -53%, the lowest since records began for this measure in 1975. Further contraction is expected in the next three months, but at a slower pace (a balance of -32%).
Firms have been running down their stocks more aggressively over the past three quarters, as well as cutting back on production. Despite this, stock levels are still more than adequate to meet demand, and firms expect to continue to de-stock heavily over the coming quarter. The greatest balance of firms since January 1981 reported stocks to be more than adequate this quarter (+28%).
Over-capacity is a growing problem for manufacturers. The highest proportion of firms since January 1983 is now working below capacity (76%) and the least number of firms since 1983 are planning to invest to expand capacity.
Investment intentions continue to be scaled back, with plans for training and re-training cut at the fastest rate since records began for this measure in 1989. For the second quarter running, the proportion of firms citing internal finance as likely to limit investment over the coming 12 months is the highest since this series began in 1979.
There was a dramatic rise in manufacturers concerned about access to credit or finance limiting their output in the next three months, with 26% the highest proportion since this record began in 1960.
While general business sentiment continued to fall this quarter, it did so at a considerably slower rate than in the previous quarter (a balance of -40% compared with -64%), and this was the first time in 21 months that the rate of decline has slowed.
In the mechanical engineering sector, optimism fell heavily again, while output declined at its fastest pace on record. Output is forecast to fall again next quarter, though at a slower rate. Total new orders declined at almost the same pace as last quarter’s rapid fall, again with a slower decline foreseen next quarter. Average unit costs continue to rise, albeit at a gradually decelerating pace, but prices declined faster than last quarter, amplifying the cost-price squeeze. This is expected to continue next quarter. Numbers employed fell at their fastest in six years and are predicted to fall heavily again next quarter. Investment intentions continued weakening, at a rate close to the record set last quarter. Contact Details and Archive...Most Viewed Articles... |
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