Slowdown in export demand puts brake on factory orders

rain newton-smith: Government needs to look at helping struggling exporters.
rain newton-smith: Government needs to look at helping struggling exporters.
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British factory orders grew at their weakest pace in almost two years this month, hurt by a slowdown in export demand, the Confederation of British Industry’s (CBI) monthly industrial trends survey showed yesterday.

The CBI survey’s total order book balance fell to -7 this month, its lowest since July 2013, from -5 in May. However, the index was still above its long-run average of -15.

There are grounds for optimism for manufacturers on the domestic demand front, but the export outlook currently remains uncertain.

The export order book balance fell to its lowest since March this year after dropping 10 points on the month, 25 per cent of firms said their export order books were below normal, 9 per cent said they were above, giving a rounded balance of -17 per cent.

Rain Newton-Smith, the CBI’s director of economics, said: “Output and overall orders are still doing better than average but hopes that export demand would start to drive forward have not yet been fulfilled.

“Improving momentum in the eurozone is being offset by the effect of the strengthening pound on UK manufacturers’ overseas sales and margins. On top of that, the ongoing Greek saga is causing uncertainty.

“In the Budget next month, the Government should look to provide struggling exporters with support to help break into key markets.”

Asked about output volumes over the past three months 35 per cent said they had risen, 22 per cent said they had fallen, producing a balance of +13 per cent. The highest since February, when it was +17 per cent.

Looking ahead, manufacturers became slightly more optimistic about output volumes in the coming three months, the survey showed.

Over the next three months, 33 per cent expect output volumes to rise, 17 per cent expect it to fall.

Britain’s overall economic growth slowed sharply in the first quarter of 2015 but is expected to bounce back in the April-June period.

Average prices at which manufacturers expect to book domestic orders over the next three months are expected to fall, according to 13 per cent of respondents while 6 per cent expect them to rise.

The balance of -7 per cent is the lowest since November 2009 when it was -7 per cent.