Manufacturing figures give cause for optimism in early 2013

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MANUFACTURERS may have some grounds for optimism going into 2013 after an improved December CBI industrial trends survey – but the final quarter of 2012 is still likely to see a significant contraction in the sector.

With manufacturing output having dropped by 1.3 per cent month on month in October, affecting most sectors, it would take a very strong performance in the final two months to prevent the fourth quarter from being down overall.

However, the CBI survey offers hope that manufacturing is on the rise and output will improve in the first quarter of 2013, helping the economy to recover from a likely dip in GDP for the last quarter of 2012.

Howard Archer, chief UK and European economist for IHS Global Insight, said: “Helped by improved orders and generally low stocks of finished goods, manufacturers now production to be flat over the next three months.

“This was a marked improvement on November when a balance of nine per cent of manufacturers expected their production to fall over the next three months.”

Of the 392 manufacturers responding to the latest monthly survey, 18 per cent reported that total order books were above normal and 30 per cent that they were below. The resulting balance of -12 per cent is nine points higher than November (-21 per cent) and a little higher than the long-run average (-17 per cent) for the first time since September (-8 per cent).

As well as a rise in domestic demand, there was an improvement in the export order balance. It rose by one percentage point from -12 in November to -11 in December, a significant increase on October’s -22 per cent, and the long-run average of -21 per cent.

“The CBI December survey is encouraging, but it is evident that manufacturers currently still face tough domestic and global conditions,” said Mr Archer. “Domestic demand for manufactured goods is handicapped by current muted investment intentions and tightening public spending.”