The CBI's July Trends Survey provides a generally soft picture of UK manufacturing although what would seem to have been, at worst, a subdued July looks set to be followed by a sharp deterioration over coming months.
The headline orders index weighed in at minus 4 percent, down only 2 percentage points versus its June reading but stronger than expected and still the second strongest outturn so far this year. Moreover, output over the last three months (16 percent after 11 percent) even showed an improvement from quarter end. However, production in the next three months (6 percent after 23 percent) recorded its worst mark since the end of last year and the quarterly business optimism index slumped fully 42 percentage points to minus 47 percent, its steepest drop since January 2009 in the midst of the Great Capital Recession.
Meantime, the impact of sterling weakness was apparent in the prices index which, at 9 percent, showed its sharpest jump since July 2011. Elsewhere, the quarterly report also revealed a nosedive in manufacturers' investment intentions for both buildings (minus 23 percent after 6 percent) and plant and machinery (minus 5 percent after 17 percent).
In sum, it looks as if July could have been a lost worse but, if business confidence is anything to go by, manufacturing will probably fall back into recession before year-end.
CBI conducts a monthly survey of senior manufacturing executives on trends in output, prices, exports, and costs. The CBI's quarterly Industrial Trends Survey collects data on topics like current business confidence, capacity utilization and investment intentions.
Started in 1958, this is the UK's longest-running private sector qualitative business tendency survey. The survey is used by policy makers along with those in the business community, academics and top analysts in financial markets. One of its key strengths is that it is released within ten days and prior to official statistics and includes data not covered by official sources. It is never revised. The data are also used by the European Commission's harmonized business survey of EU countries.
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