Manufacturing demand weakens but recovery is still on track

Ian McCafferty, CBI Chief Economic Adviser, commented: "Although demand for UK-made goods has weakened a little this month, the manufacturing sector remains on a path of recovery, with conditions much improved on just a few months ago. UK exports continue to be boosted by the weak pound and strengthening world trade, firms still expect a healthy rise in production in the coming months and inflationary pressures look to be easing a little." Responding to the latest CBI monthly Industrial Trends Survey, 19% of manufacturers said that total orders were above normal, while 42% said they were below. The resulting balance of -23% is down slightly on the figure in May (-18%), but does not reverse the improving trend of recent months, and the balance is still quite close to the long-term average (-18%). Export order books were also a little weaker compared with last month. Nevertheless, the balance of -2% shows that export orders are still considered to be broadly normal. This follows last month's positive survey balance (+3%), the first since March 2008 (+3%), which was a considerable improvement on April this year (-16%). Manufacturers still expect to raise output firmly during the next three months, with a net 15% expecting production to rise. This is broadly unchanged on May's balance of +17%, and is well above the long-term average of +5%.