UK Manufacturers See Weaker Demand; Output Fall Most Since 2020

UK manufacturers reported a slight fall in orders and their production declined at the fastest pace since late 2020, the Industrial Trends Survey results from the Confederation of British Industry showed on Monday.

The order book balance fell slightly to -6 percent in December from -5 percent in November. Nonetheless, the balance was better than the long run average of -13 percent and also economists’ forecast of -9 percent.

Manufacturing output volume declined the most since September 2020. The output balance came in at -9 percent in the three months to December, down from +18 percent in the preceding period.

Selling price inflation is forecast to rise slightly in the next three months. The balance is forecast to climb to 52 percent from 47 percent. However, expectations for selling price inflation were below the multi-decade high seen in the previous year.

“The corrosive effect of higher inflation on demand is increasingly clear, as manufacturing output contracting at the fastest pace in two years over the last quarter,” Anna Leach, CBI Deputy Chief Economist said.

Leach said some global price pressures eased recently but cost and price inflation would remain high in the near term, with rising energy bills a key concern for manufacturers.

The recent Purchasing Managers’ survey showed that the British private sector contracted for the fifth successive month in December amid deterioration in demand, though the pace of decline eased as activity and new orders fell at the slowest pace in three months. The Purchasing Managers’ Index rose to 49.0 from 48.2 in November.

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