The ongoing manufacturing recovery in the UK faded somewhat over the past three months, hurt by a drop in overseas demand and a falloff in domestic orders.
According to the latest industrial trends survey from British business organization CBI, total orders fell slightly in the period, while expectations were for continued growth. The CBI said order book levels were marginally below normal, and output growth slowed considerably.
“While manufacturers expect a modest improvement in both orders and output in the coming three months, they are scaling back their expectations compared to earlier in the year,” the report said. “As a result they are slightly more pessimistic about the general business situation than three months ago.”
Overall demand for capital goods – heavy plant, industrial machinery, office equipment and computers – was steady last quarter, he CBI said, while orders for intermediate products like chemicals, textiles, and consumer goods fell.
The group said the slowdown in demand has been concentrated in the past few weeks. As a result of softer demand, fewer firms are working at full capacity than in July, and 92 percent said they have sufficient capacity to meet expected demand.
Firms continue to expect they’ll be able to pass on some of their increased costs to domestic customers next quarter, but overseas prices are set to remain flat and are still seen as the biggest inhibitor to export orders. The CBI said average unit costs rose in the quarter, squeezing profit margins as selling prices rose just modestly at home while falling overseas.
Of the 551 firms responding to the survey, 26 percent said volume of total new orders was down in the three months to October, compared with the previous quarter, and 21 percent registered an increase.