Investments: Manufacturing Drops



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According to the CBI, after the rise in UK manufacturing orders in August, they fell again for the month of September. The CBI’s Industrial Trends Survey of around 470 manufacturing companies revealed that the number of orders was at their lowest since last October. Despite this, manufacturers are optimistic that orders would increase over the next three months.

The Figures Show…

The motor industry had previously seen production rising by 11% in August and an expected expansion next year. According to the CBI survey, 31% of manufacturers reported orders below the normal amount in September. Only 22% had orders above average. This is 10% different to August’s report, with a 1% growth in August and -9% in September.

The wider picture of the economy is more bleak, with the International Monetary Fund downgrading its UK forecast for economic growth from 1.5% to 1.1% and a revelation that August’s public sector borrowing reached a record high for the month at £15.9 billion. The estimate of how much had previously been borrowed did decrease however. This has brought the Monetary Policy Committee from the Bank of England to the conclusion that Quantitative Easing (QE) might be more necessary, prompting consideration of the measure.

Solutions Such as QE

QE was recently revealed to have helped increase GDP after the banking crisis, and while the situation is different and requires significant discussion, this could mean that the solution is more stimulus in this way.

The CBI survey also revealed that elements revealed that companies might raise prices, but that this was less obvious than the increases in the first half of the year. Fewer companies appeared to be planning this as well.

Ian McCafferty, chief economic adviser of the CBI had this to say, “UK manufacturers report some slackening in demand this month, following the volatility in financial markets and the slowdown in growth in our major trading partners. Nevertheless, UK manufacturers remain optimistic that production will continue to grow over the coming months.”

This optimistic outlook is a benefit, as confidence in the economy is necessary for recovery to continue. Consumer confidence will need to increase, and that can only occur with optimism from the industry.

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