Lack of demand delays manufacturing sector recovery

There
is no sign of a manufacturing recovery with weak domestic and international
demand blocking the sector’s long-awaited turnaround.

The
latest CBI Monthly Industrial Trends survey, published today (Thursday), shows
the more competitive pound has yet to benefit exporters, and manufacturers need
a cut in interest rates to lift confidence across the hard-pressed sector.

Order
books showed no significant improvement on last month and continue to be
considerably less than normal. 
Thirty-nine per cent of firms said orders were below normal, while just
12 per cent said they were above.  The
balance of -27 per cent compares with -29 per cent recorded in the May and
April surveys.

Overseas
demand remains weak with export orders below normal and slightly worse than
last month.  The balance of -35 per cent
compares with -32 per cent last month.

Firms
continue to expect output to decline modestly over the next four months.

The
balance of -6 per cent of companies expecting to cut production compares with
-3 per cent last month.  Manufacturers
have not expected a rise in output since October 2002.

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Doug
Godden, CBI head of economic analysis, said: "Demand at home and abroad
remains persistently weak and output continues to stagnate.  Companies are cautious about the future, and
with no danger from inflation, an interest rate cut remains appropriate."

By Ben Willmott