Negative Outlook For Manufacturing Industry

A Survey by the Confederation of British Industry (CBI) has shown widespread pessimism in the manufacturing industry amid a slump in factory orders, business investment and consumer spending both in Britain and overseas.

Manufacturer’s outlook for the next quarter is as bleak as it has been since the recession ended two years ago. Companies are increasingly scaling back investment and cutting jobs and other expenses in the face of slowing demand and a faltering economy. Manufacturing had previously been one of the UK’s best performing industries, exploiting the weakened pound to increase exports.

Insecurity throughout the euro-zone and squabbling over debt matters in the United States are being cited as the primary causes of the slowdown in factory orders and output. In a statement to the press CBI’s chief economic advisor, Ian McCafferty stated: “How far the slowdown will be borne out is yet unclear, but the combination of political and economic uncertainty is sapping confidence”.

The earthquake and tsunami in Japan has also taken its toll on manufacturing worldwide, crippling supply chains and reducing production in many different countries, including the UK.

Manufacturing output declined by 0.3% in the 2nd quarter of 2011, the first time it has fallen in two years, new orders, exports and foreign sales have also fallen dramatically in recent months. The CBI report’s quarterly measure of expectations does not predict much improvement to the situation as we enter the 3rd quarter.

If there is a positive side to this situation it’s that manufacturer’s pessimism has extended to their price expectations, giving the Bank of England a chance to get a grip on inflation, which is currently running at more than double their current target of 2%..

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