Manufacturers report dip in orders

UK manufacturers reported a plunge in total orders this month, a key survey revealed today, adding to evidence that the economic recovery is grinding to a halt.

Total order levels dipped in September after growing in August, the CBI Industrial Trends Survey said, while export orders hit the lowest level since October last year.

However, there was some positive feedback from the industry, as manufacturers predicted orders will increase over the next three months, despite the recent drop-off in activity.

The survey is likely to fuel concerns for overall economic growth in the third quarter - July to September - following similarly downbeat manufacturing data from the Office for National Statistics and Markit Purchasing Managers' Index (PMI).

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The weaker CBI survey deals a further blow to hopes that the manufacturing sector can make a sustained decent contribution to growth.

"Manufacturers are plainly now finding life much more challenging as domestic demand is held back by serious headwinds, notably including tightening fiscal policy and the serious squeeze on consumers' purchasing power, while weaker global growth is hitting exports pretty hard."

The CBI said 22% of manufacturers described total orders as above normal in September while 31% said they were below normal, with the resulting balance of minus 9% indicating a drop in activity. This compares to a positive reading of 1% in August, which suggested growth across the sector.

A sharp fall in consumer goods firms acted as the main downward driver, the CBI said, but despite the decline both total and export orders remain above the long-term average.

The weak survey adds to the economic gloom engulfing the UK in recent weeks, with soft manufacturing growth, declines in the powerhouse services sector and stagnant trade all raising the possibility of a double-dip recession.

Ian McCafferty, CBI chief economic adviser, said: "UK manufacturers report some slackening in demand this month, following the volatility in financial markets and the slowdown in growth in our major trading partners."

Elsewhere, the CBI said pricing pressures strengthened slightly but are significantly less intense than in the first half of the year.

A balance of 13% of manufacturers, up from 9% in August, expect to raise prices in the coming quarter, but this remains much lower than data seen in the six months to June.

The weak growth and softer price pressures will add weight to the argument in favour of increasing the Bank of England's quantitative easing (QE) programme.

Minutes from the Bank's Monetary Policy Committee meeting published yesterday revealed a surge in support for boosting the QE stock, but the number of members who voted in favour of such a move was held at one in Adam Posen.

The CBI survey comes shortly after the International Monetary Fund (IMF) slashed its growth forecast for the UK and warned the global economy had entered a "dangerous new phase".

PA