Debt crisis is battering factories

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factory orders suffered their biggest drop in more than a year in December after a further weakening of export prospects due to the eurozone debt crisis.

The Confederation of British Industry survey’s total order book balance fell this month to -23 from -19 in November, the lowest reading since October last year and below expectations for a balance of -21.

The export order book balance sank to -32 from -31, its lowest since January 2010.

“Conditions in the UK manufacturing sector remain difficult,” said CBI chief economic adviser Ian McCafferty.

“The weaker export performance no doubt reflects ongoing instability in the euro area, our biggest export market, and its knock-on impact on prospects for the real economy.”

The expectations balance for manufacturers remained steady at a subdued -8, while the price expectations balance rose to +7 from +2, its highest since September, when consumer price inflation hit a three-year high.

“A clear and orderly resolution to the eurozone crisis remains essential to prevent further adverse effects on both UK manufacturing and the wider economy,” Mr McCafferty said.

Howard Archer, economist at IHS Global Insight, said the survey added to the “hugely disappointing” stream of bleak news on the manufacturing sector which suggests that industrial production will contract in the fourth quarter.

He said: “Manufacturers are being battered by major domestic and international headwinds.”

But he added that “one area of relief for manufacturers is that input prices are now moderating after surging earlier this year”.