Manufacturers’ hopes high in face of falling demand, but concern mounts over 2012 output as stock builds up

MANUFACTURERS’ order books shrank in September, but they expect output to keep growing over the next three months, according to a survey published yesterday by the Confederation of British Industry (CBI).

Thirty one per cent of firms reported “below normal” orders in September, against 22 per cent who said they were higher than usual.

In terms of export orders, the net balance reporting growth fell to -12 per cent, the lowest level in 11 months. Both of these figures are above the long-term average net balances of -18 per cent and -21 per cent respectively.

Although the figures are negative, optimism remains in the sector as more firms expect production to increase than decrease in the next quarter.

Twenty nine per cent anticipate an increase while 20 per cent expect a fall. That nine per cent net figure is above the long-term average of six per cent, but well below this year’s peak. In March the figures came in at a very positive 27 per cent.

Companies surveyed also reported rising inventories, with the net balance of firms with excess inventories rising to 21 per cent. That compares with 14 per cent in August and three per cent in June.

“Each time this measure has risen sharply to around this level over the past 25 years, it has been accompanied or followed by falling output as firms cut back to try and shrink inventories,” said Citi’s Michael Saunders. “And this is the sharpest rise in firms reporting excess inventories since the survey began in 1977.”