In the latest industrial trends survey by the Confederation of British Industry (CBI), manufacturers reported a significant decline in output volumes for the three months leading up to November.
Contrary to expectations for expansion, the industrial trends survey showed that production fell to -17% in the three months to November, down from -6% in the three months to October. The outlook remains grim as manufacturers anticipate a further decline in output by -7% in the quarter to February 2024.
These findings suggest a challenging economic landscape for the manufacturing sector, raising concerns about the trajectory of production and order books in the coming months.
Manufacturers cite weak order books as a key concern
According to the CBI, order books reached their weakest level since the second COVID-19 lockdown in early 2021. Both total and export order books were reported as below normal in November, marking the most significant decline since January and February 2021, respectively.
The survey, based on responses from 232 manufacturers, also identified a widespread downturn across the industry, with output falling in 10 out of 17 sub-sectors. The most substantial declines were observed in the chemicals, mechanical engineering, metal products, and metal manufacturing sub-sectors.
Anna Leach, CBI deputy chief economist, said:
"Manufacturing output has been under pressure recently given the combination of slowing demand and the run-down of stocks of finished goods. This latest data will fuel concerns that the economy is slowing swiftly as the highest interest rates for 15 years take their toll on demand.
"The further softening in orders [in November] is a worry, with order books now in their weakest position since the start of 2021 when the economy was locked down amid the pandemic".
Could the industry turn a corner?
While the CBI survey showed a decline in manufacturing outputs last month, there are some indications that the industry could turn a corner as we approach the new year.
The latest purchasing managers index (PMI) from S&P Global and the Chartered Institute of Procurement and Supply (CIPS) rose to 47.2 in November. While a reading below 50 suggests a contraction in the sector, the rate of decline eased sharply from 44.8 in October.
Business confidence also edged higher in November, with around half of manufacturers (53%) saying they expect production to rise in the next year.
However, the index also showed that job losses in the sector continued for the 14th month in a row, while manufacturers fractionally increased selling prices in an attempt to protect their finances.
Dr John Glen, chief economist at the Chartered Institute of Procurement and Supply (CIPS), said:
"Optimism for the next 12 months showed a slight uplift as businesses hoped a new year could bring more stability and growth.
"However, other areas of concern include reduced spending on stock and also operational capacity as rising job losses signalled more difficult times ahead."
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