'Sharp decline' in export demand

 

Export demand has slumped to its lowest level for nearly two years amid fears the eurozone crisis is damaging manufacturing prospects, the CBI said today.

A balance of 31% of factory bosses reported that export orders were below normal in November, a slide on the balance of minus 14% seen the previous month and its lowest reading since January 2010.

Amid faltering UK demand and weakening export markets, manufacturers said for the second month in a row that they expected output to fall over the next quarter, adding to fears of another recession.

A balance of 8% expected a fall, little improved on the two year low of minus 11% in the previous month.

CBI chief economic adviser Ian McCafferty said: "Developments in the eurozone, and their impact on prospects for our major trading partners, are clearly hitting the UK manufacturing sector, and we've seen a sharp decline in export order books this month.

"In response to weaker demand, firms still expect to cut back on production.

"With heightened uncertainty over global prospects and business confidence falling sharply, it is very possible that factories will see production slowing further in the near term."

Overall, industrial order books, which include domestic demand, were slightly down on the previous month and "represented a significant worsening" on earlier in the year.

Howard Archer, chief economist at IHS Global Insight, said: "The CBI survey fuels concern that the UK economy is in serious danger of contracting in the fourth quarter.

"The manufacturing sector is now finding life very challenging as it battles against serious domestic and international headwinds."

Mr Archer said one piece of relief from the survey was that the weakening demand has helped drive down the pace of output inflation.

Manufacturers still expect prices to rise in the next three months, but the reading was "markedly lower" than in the first half of the year.

Chris Williamson, chief economist at Markit, said: "The more forward-looking indicator from the CBI survey, which looks at companies' expectations of production levels over the next three months, was also worrying, failing to show much improvement on October's 27-month low.

"This suggests that increasing numbers of producers will be looking to reduce capacity and cut costs, which will invariably mean job losses."

PA

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