Fall in factory orders casts doubt on manufacturing recovery
Factory orders slowed more than expected in July, casting a shadow over the pace of recovery in the manufacturing sector.
The survey by the CBI, which covered 481 firms, found 2% of UK manufacturers reported an increase in orders, or an above normal level of orders this month, compared with 11% in June.
The CBI Industrial Trends Survey also found that export orders were flat, raising fears that the strength of sterling is jeopardising the chances of a rebalancing of the consumer-led recovery.
The figures come on the back of a surprise 1.3% fall in factory orders in May, as reported by the Office for National Statistics (ONS). But economists said that despite the June CBI headline figures and the ONS fall in May, manufacturing remained well positioned to grow over the rest of the year.
Outside the often volatile monthly numbers, total new orders for the quarter ending in July rose to a balance of plus 24 from plus 21 in April – the highest level since 1995.
The CBI report said domestic orders rose at their fastest pace since 1988, with new orders over the next three months expected to grow at their strongest since 1977. Employment in the sector also continued to rise strongly.
CBI deputy director-general Katja Hall said the recovery was keeping "a good pace", but warned that increasing international instability in areas such as the Ukraine and the Middle East and the rise in sterling could put the recovery at risk.
IHS Global Insight chief UK economist Howard Archer said the report provided overall reassurance that the manufacturing sector's upturn remains intact despite May's surprise marked relapse in output.