CBI predicts manufacturing recession

Source: Manufacturing Digital

Date :24/07/2008 16:06:17

The CBI has predicted manufacturing output to be minus 0.4 percent in the three months to June and minus 0.5 percent in the three months to September, pushing the sector into recession for the first time since 2005.

In the last three months, average unit costs rose for 65 percent of manufacturers while they fell for just seven percent. The resulting balance of +58, the highest since October 1980, comes on the back of soaring oil prices, up by over a third in the last quarter alone. Firms expect costs to increase at a similar rate in the next three months.

Ian McCafferty, the CBI’s chief economic adviser, said: "Cost pressures on manufacturers have been noticeable for over four years but in the last three months they have been their most intense for nearly three decades.

"So, it comes as little surprise that manufacturers are passing some of these higher costs onto customers, although this is unlikely to rescue profits from a margin squeeze,” he continued.

"The record oil price peaks in the last three months have pushed down further on business confidence and lowered firms' expectations for demand in the coming quarter. Even exports, which so far have helped bolster manufacturers' order books, are expected to soften despite the boost to competitiveness from weaker sterling."