Poor demand deepens manufacturing woes

There is no sign of a manufacturing recovery with weak domestic and international demand blocking the sector's long-awaited turnaround, according to the Confederation of British Industry (CBI).

The latest CBI Monthly Industrial Trends survey, published yesterday found that the more competitive pound has yet to benefit exporters, and manufacturers would need a cut in interest rates to "lift confidence across the hard-pressed sector".

Order books showed no significant improvement on last month and continue to be significantly below normal, according to the survey.

Thirty-nine per cent of firms said orders were below normal while just 12% said they were above. The balance of minus 27% compares with minus 29% recorded in the May and April surveys.

Overseas demand remains weak with export orders below normal and slightly worse than last month – with a balance of minus 35% compares with minus 32% last month.

Firms continue to expect output to decline modestly over the next four months, at a balance of minus 6% of companies expecting to cut production comparing with minus 3% last month. Manufacturers have not expected a rise in output since October 2002 in CBI surveys.

Doug Godden, CBI Head of Economic Analysis, said: "Manufacturers' long wait for recovery seems set to continue and firms will take little comfort from the current business climate. Demand at home and abroad remains persistently weak and output continues to stagnate. Companies are cautious about the future and with no danger from inflation, an interest rate cut remains appropriate."

The Monthly Industrial Trends survey was carried out between 22 May and 5 June 2003 and 962 manufacturers responded. During the period sterling averaged €1.39 (DM2.72) and $1.64 compared with €1.42 (DM2.77) $1.60 and in May's survey.

(GMcG)