Factory output hits three-year low

 

Manufacturers saw output reach its lowest level in three years this month as companies became increasingly concerned by political and economic problems abroad, a survey said.

An overall balance of 3% reported a fall in output in the three months to October, the lowest level since October 2009, the CBI said, while total orders also tumbled.

Some 17% of manufacturers reported a fall in export orders, while 11% of firms saw domestic orders drop, the CBI said.

The proportion of firms blaming political and economic conditions abroad for a lack of orders rose from 25% in the three months to July to 34% in the most recent period.

Howard Archer, chief UK and European economist at IHS Global Insight, said the survey "reinforces suspicion that the UK still faces a major task in developing sustainable recovery" after an expected return to economic growth in the third quarter.

The economy has been mired in the longest double-dip recession since the 1950s but official figures tomorrow are expected to confirm it has returned to growth.

However, surveys for manufacturing, services and construction have been mixed and most economists believe the underlying picture of the economy is weak.

Despite the gloomy output performance, manufacturers do expect a moderate recovery in output over the next three months, the CBI said.

However, expectations for domestic orders growth remain unchanged relative to the previous quarter, while export orders are once again expected to be broadly flat.

Optimism regarding the business situation and export prospects for the year ahead both deteriorated, the survey said, while concern grew over orders and sales acting as a constraint on output in the coming three months.

However, other indicators in the survey held up better.

Numbers employed rose for a ninth consecutive quarter, the longest run of rising headcount in the quarterly survey's 40-year history.

Anna Leach, CBI head of economic analysis, said: "UK companies are increasingly concerned by political and economic conditions abroad, whether it is ongoing weakness and uncertainty in the eurozone or the approaching fiscal cliff in the US."

Manufacturers' export prices fell in the period, while domestic prices were broadly flat, but firms expect domestic price inflation to pick up.

Samuel Tombs, UK economist at Capital Economics, said: "While tomorrow's third quarter GDP figures may reveal a technical bounce-back in industrial production thanks to the effect of the jubilee, today's CBI survey added to the evidence that the underlying trend in output is still down."

PA

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