UK factory orders fall at fastest rate in 17 years

British factories suffered a bigger-than-expected drop in orders this month raising new fears about the health of the economy.

In July, manufacturing orders fell at their fastest rate since January 1992, according to the Confederation of British Industry (CBI).

The CBI’s gauge of orders dropped from -51 to -59, far below the -45 measure expected.

However, there was some good news as factories indicated that the business environment had improved over the past three months, with the balance rising to -16, the highest since October 2007.

There was also a slowdown in the pace of decline of overall output. Some 43 per cent of businesses said output had declined in the three months to July, while just 12 per cent said their output rose. The resulting balance of -31 indicates that output is still falling, but at a slower rate than in the three months to June when the balance was -53.

Ian McCafferty, chief economic adviser to the CBI, said that the gloomy figures from the manufacturing sector, which accounts for about a sixth of the country’s total output, underlined that the country faced difficulties in the wake of the downturn: “These figures reinforce our view that the road out of recession will be long and slow,” he said.

“The further sharp decline in export orders is of particular concern as we are not seeing much of a boost from the relative weakness of sterling. There are also further indications that the inventory cycle may not be turning as quickly as many had hoped.” The measure of export orders picked up only marginally to -45 from -52 in June, indicating that orders are still declining sharply.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The CBI industrial trends survey for July disappointingly and worryingly showed a marked relapse in order books in July, thereby raising concerns about UK economic recovery prospects.”

July 22, 2009
Grainne Gilmore

Source: Times Online

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