UK manufacturing sector sees output slip - CBI

(Sharecast News) - The UK's manufacturing sector continued to struggle in September, a survey showed on Friday, as higher costs weighed heavily. According to the latest CBI Industrial Trends Survey, total orders fell to a five-month low of -18 in September, from -15 a month previously. Analysts had been looking for a total orders balance of -17.

The output volumes balance in the three months to September was -10, although there was an improvement on August's -19. It remains, however, well below the series average of 3.

Output fell in nine of the 17 sub-sectors covered by the survey, with the biggest declines seen in motor vehicles and transport equipment, chemicals and paper, and printing and media.

Anna Leach, deputy chief economist at the CBI, said: "Output is expected to flatline at best though the rest of the year. With order books having been below their long-run average for eight of the last nine months, manufacturers see little prospect of a recovery in the final months of the year.

"Materials and financing costs are high and are squeezing manufacturers and their customers alike."

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "The further decline in the CBI survey in September chimes with other evidence that the downturn in the manufacturing sector has further to run.

"We think manufacturing output will continue to tick down over the coming few months, as demand remains weak and firms continue to reduce their excess stock.

"The survey, however, adds to our conviction that the rate of increase in the core goods consumer price inflation will slow in the second half of this year. While the net balance of manufacturers intending to increase selling prices over the next three months increased to 14, from a 30-month low of 8 in August, it was consistent with core producer output price inflation remaining around 1%."

The survey of 292 manufacturing firms was conducted between 24 August and 12 September.

A balance is the weighted percentage of companies reporting an increase minus those reporting a decrease.