Trends Suggest Things Will Get Better

New orders increased over the last three months along with export deliveries according to the CBI Industrial Trends survey. Unit costs have increased generally. There was also an increase in the volume of output. Currently 64% of firms are working below capacity but the volume of new orders is expected to improve over the next three months. Export deliversies are also expected to increase. Production is expected to increase likewise but firms expect employment to fall and unit costs increases are expected.

Growth In Manufacturing Output

An increase in overseas demand for UK goods and continued stock reduction saw manufacturing production increse for the first time in two years according to the latest CBI Industrual Trends survey for the three months to January 2010. Weak demand and access to finance mean that the outlook is still uncertain.

The survey reports the strongest output since January 2007 and the first increase in export orders since January last year. De-stocking is slower however and demand is weaker than expected. Business confidence is continuing to get better and more more managers are optimistic than three months ago. Fewer businesses reported reductions in staff numbers.

Business are also reported to be planning to invest in training and retraining and innovation. Capital investment in buildings is expected to be reduced but plant and machinery investments will remain almost unchanged. Firms are working below capacity and domestic prices are expected to rise.

Exports To Lead Growth Next Month

Medium sized firms are reporting an increase in confidence for the first time since April 2007. They are expecting a growth in orders despite a marked fall in the volume of total new orders in July. Export orders also continue to decline but again firms are increasingly optimistic about exports. As with orders, so output is also slowing, but the optimism about exports includes leading a return to growth in the next quarter.

The quarterly CBI report on SMEs says that business remains difficult but although the indications are that business is still falling it will improve over the next three months. The position of the pound has not made much difference to small and medium sized businesses and their exports but they are responding to improved credit conditions. Firms are still running down stocks and working below capacity.

Small Business Downward Trend Expected To Slow

The CBI's latest SME Trends Survey shows that output has gone down at the fastest pace of decline for more than 20 years. The factor most likely to limit output will be sales and orders. The report also shows a fall of 64% in total new orders, the steepest fall since CBI records began, with 13% reporting an increase. The volume of output reported shows a 57% decline. Employment figures were no better with 50% of respondents reporting record increase in job losses, only 6% taking on new staff.

The number of firms working below capacity has continued to rise for over a year with 74% now running below capacity and companies are also still running down stocks. Export orders are weak. Credit and financial worries are still a problem and may limit exports. Average domestic prices continued to decline and costs continued to rise as imports are becoming more expensive.

Investment intentions are low and uncertainty about demand is likely to be a factor limiting plans to invest. However, general business sentiment is up as the decline in orders, output and employment is expected to slow down over the next three months.