Further economic gloom is to be expected, the CBI's quarterly industrial report reveals, as manufact...
Further economic gloom is to be expected, the CBI's quarterly industrial report reveals, as manufacturing orders are falling at the fastest rate in four years paced by a visible decline in domestic demand.
This comes as the survey shows that "home orders" are now dropping at the fastest rate since April 1999, indicating the weakness in global trading conditions that caused the manufacturing slowdown is now spreading to other markets.
Today's bleak result was predicted. However, to prevent any additional downfall, the CBI will from now on increase pressure for a cut in interest rate.
This report was one of the worst for a long time, the CBI says, as the fall in domestic orders, verified by a negative balance of minus 23%, was greater than expected.
On top of that, the survey is also the third successive one to display a decline in manufacturers' confidence with manufacturing orders falling faster than expected over the past four months.
Of the firms questioned, 37% reporting a fall compared to only 16% showing an increase.
This was a drop of 12% compared to the latest industrial report and the CBI predicts that total orders will proceed to decline sharply over the coming months.
Meanwhile, export orders continue to decline at the same pace as reported in January, the sharpest rate for a year.
This drop in both domestic and export orders has led to a further fall in manufacturing output over the past four months.
According to the CBI, the trend is expected to continue as the polled firms predict a decline in output - the first time in a quarterly industrial report for over a year.
"The end of the Iraq conflict will steady nerves. But the world's economic problems were there before the war and they are still there now. Manufacturers hoped that domestic demand would hold up until there was a pick up in global trade but that does not seem to be happening," says Digby Jones, CBI director-general.
"This has been compounded by a slowdown in other parts of the economy, most worryingly in consumer spending. It would be wrong to overstate the situation - we are not predicting a recession at all. But the time has come for another cut in interest rates to see us through this difficult patch. The prospects for a sustained recovery appear a long way off and signs of inflation in the wider UK business sector are rare."
One positive point, however, was the drop in the amount of firms working below capacity with 4% compared to the previous result, which showed the highest figures for 20 years.
Also, costs rose slightly over the past four months.
Nevertheless, the future still looks bleak as firms continue to lack pricing power with profit margins remaining under pressure as a result.
At the same time, the rate of job cuts over the next couple of months is expected to accelerate to the fastest rate for a year, following another significant decline over the past quarter.
According to Gerrard, the negative outcome of the CBI survey was expected.
However, the downfall clearly reflects the uncertainty prevailing at the time as the survey was conducted within the period when of the Iraqi war, Gerrard says.
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