Hopes of a swift recovery in the manufacturing sector were dealt a blow after survey figures revealed the worst result for order books in more than 17 years.
The latest CBI Industrial Trends Survey suggested a relapse for the sector in July as a balance of minus 59 per cent of manufacturing firms reported that their order books were at normal levels – the worst reading since January 1992.
This comes after improving order figures for May and June.
Quarterly figures also signalled ongoing pessimism over demand, with firms running down their stocks at the fastest rate in the 51-year history of the survey and expecting a similar reduction over the next three months.
But the quarterly CBI figures, which are seen as less volatile than the monthly results, suggested a marginally better picture overall for orders in the three months to July.
The figures showed 43 per cent of firms said the volume of output dropped in the period, while 12 per cent said they rose, which gave a balance of minus 31 per cent – the best result since the end of 2008.
Howard Archer, chief economist at IHS Global Insight, said: “Manufacturers clearly still face serious obstacles and the CBI survey heightens suspicion that sustainable growth in the sector could remain elusive for a considerable time.
“While leaner stocks and a more competitive pound are helping their position, manufacturers are still battling against muted domestic demand, difficult conditions in overseas markets and intensified competition.”
The recent strengthening of the pound appeared to help export orders in July, as a stronger pound makes British goods cheaper for foreign customers.
A balance of minus 45 per cent of manufacturers said that export order books were at normal levels, which compared with minus 46 per cent and minus 52 per cent in May and June respectively.
But the quarterly figures for export orders were less encouraging, with a balance of minus 39 per cent compared with the previous quarter’s minus 18 per cent.