Recession concerns intensified today after new data showed manufacturing output fell at its fastest pace since September 2020 in July.
According to the Confederation of British Industry’s (CBI) industrial trends survey, the balance of factories reporting a rise in output versus a fall slumped to -19 per cent, compared to plus three per cent in the three months to July.
Output fell in 15 out of the 17 sub-sectors included in the survey, with motor vehicles & transport, mechanical engineering and paper production driving the fall. The survey was based on the responses of 277 manufacturing firms.
Looking forward order books were slightly below average, at -15 per cent compared to the long run average of -13 per cent.
Martin Sartorius, the CBI’s principal economist, said: “With output volumes contracting at their fastest pace since the Covid-19 pandemic and order books deteriorating, this survey makes for gloomy reading for manufacturers.”
Sartorius argued that the weak outlook shows the need for the government to “double-down on delivering sustainable growth” by offering incentives to boost green investment and encourage decarbonisation.
The survey also showed that inflation is likely to continue falling over the next few months with expectations for selling price inflation over the next quarter at its softest since February 2021.
Expectations for selling prices have now eased for eight consecutive months.
“Easing price pressures will bring some relief to many manufacturing firms and the broader economy,” Sartorius said.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said that the survey pointed to a likely fall in inflation over the second half of the year.
“This (survey) adds to our conviction that the rate of increase in the core goods CPI will slow sharply in the second half of this year,” she said. Inflation fell to 6.8 per cent in July, although core inflation continued to rise.