Recovery setback as factory orders fall

Factory orders plunged to a six-month low in October as a slowdown in the global economic recovery hit demand for UK goods, figures showed.
By The Newsroom
Published 19th Oct 2010, 23:13 BST
Updated 19th Oct 2010, 23:13 BST

The latest quarterly manufacturing survey from the Confederation of British Industry (CBI) showed that a plunge in exports saw the reading for total order books slump to its lowest since April.

But the report confirms there are hopes of a recovery bounce-back in the sector, with expectations for output over the next three months at the best level since April 2007.

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Of the 420 manufacturers that responded, 32 per cent expect a rise in output volumes, and 14 per cent a fall, giving a balance of 18 per cent.

A pick up in exports is seen driving the growth as manufacturers hope global demand will increase over the coming months, while continuing weakness in the pound may also provide a boost, making it cheaper for other countries to buy UK products.

This is set to offset poor demand in their domestic market. A balance of 2 per cent expect orders from within the UK to rise. Activity is also likely to be held back as the surge in stockbuilding seen after the recession has begun to fade.

Howard Archer, chief economist at IHS Global Insight, said: "Despite some positive elements in the CBI's October survey, the deterioration in the orders balance to a six-month low maintains concern that activity in the manufacturing sector has lost significant momentum compared to the first half of the year."