CBI - UK's Manufacturing Sector Decline Slowed Down In July
According to the latest survey from CBI, the decline in the UK's manufacturing orders slowed down during July 2023. Looking ahead, the selling prices are also expected to slow down.
Just a month ago, the balance of new orders was -15, which improved to only -9 in July. If we look back, the average reading for the new orders is -13, which is an indication that the manufacturing sector is showing signs of recovery.
Short-Term Recovery In Manufacturing
Overall, the trend is very positive and tells us that optimism is returning to the UK's manufacturing sector. In fact, the CBI survey's quarterly reading is now sitting at a 2-year high which is a good sign for the UK's GDP.
The CBI survey's results are further cemented by the S&P Global business survey published a few days ago. According to the S&P Global survey, the downturn in this sector is also slowing down.
However, the lead economist of the CBI believes that that optimism is very short-term and likely limited to this quarter. They added that the overall picture of the UK manufacturing sector is still subdued.
Another important detail revealed by the survey was the output prices which are not sitting at one of their lowest levels, only last seen on February 2021. According to the CBI, the cost pressure in the country is acute.
Looking ahead, they said that the margins are being squeezed, which is a worrying sign. When coupled with higher finance costs in the UK amid all of the recent rate hikes, the investment plans are taking a big hit.
That's why the investment intentions in the last quarter in regard to machinery and plants are already sitting at a multi-year low.
If we look into the medium term, the BoE decision will play a key role in the UK's manufacturing sector revival. Any more rate hikes will be deemed bad for the manufacturing sector, while a rate cut will yield the opposite results.