Manufacturers reported that output volumes fell in the three months to November, disappointing expectations for expansion, according to the
CBI’s latest Industrial Trends Survey. Furthermore, manufacturers expect output volumes to decline further into next year.
A more subdued outlook for production comes as order books fell to their weakest level since the second Covid-19 lockdown in early 2021. Both total and export order books were reported as below normal in November, to the greatest extent since January and February 2021 respectively.
The survey, based on the responses of 232 manufacturers, found that output volumes fell in the three months to November (weighted balance of -17%, from -6% in the three months to October) and is expected to fall further in the quarter to February 2024 (-7%). Output fell in 10 out of 17 sub-sectors in the three months to November. The decline was driven by the chemicals, mechanical engineering, metal products and metal manufacturing sub-sectors.
Meanwhile, total order books were reported as below normal in November and deteriorated sharply from last month (-35% from -26%). The level of order books is well below the long-run average (-13%) and their weakest since January 2021. Export order books were also seen as below normal and deteriorated from last month (-31% from -23%). This was below the long-run average (-18%) and their weakest since February 2021.
Expectations for average selling price inflation over the next three months saw little change from last month (+11%, from +7% in October). Selling price expectations were only marginally above their long-run average (+7%), having declined steadily over the last year and a half from the multi-decade high seen in 2022 (+80% in March 2022). Stocks of finished goods were seen as broadly adequate in November (+3% from +4% in October), below the long-run average (+12%).
Anna Leach, CBI deputy chief economist, said: “Manufacturing output has been under pressure recently given the combination of slowing demand and the run-down of stocks of finished goods. This latest data will fuel concerns that the economy is slowing swiftly as the highest interest rates for 15 years take their toll on demand.
She concluded: “The further softening in orders this month is a worry, with order books now in their weakest position since the start of 2021 when the economy was locked down amid the pandemic.”