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London, MNI – UK manufacturing sentiment deteriorated over the past
three months, with stagnant output and weak demand, the CBI said today.

The outlook for the next three months is more upbeat however,
suggesting manufacturing could make a positive contribution as the first
quarter progresses. The CBI noted manufacturers expected to see slight
rises in export orders and ouput over the next three months.

The survey showed output weakened sharply in the three months
through January with a balance of 2 on the quarterly survey, down from
10 in the October survey and the lowest balance since April 2010.

Manufacturers expect output to rise in the next 3 months with a
balance of 15% compared with -11% in October.

The CBI noted that the sharp swing in the quarterly output number
was due to volatility in chemical sector production. Excluding chemicals
the downturn in output was less marked but broader conditions in the
manufacturing sector remained fragile, the CBI said.

The quarterly survey also showed domestic and export orders falling
for the first time in two years.

The survey was conducted between Dec 15 and Jan 11.

“It is clear from this survey that conditions in UK manufacturing
remain fragile,” Ian McCafferty, the CBI’s chief economic adviser, said.

“While the acute fears seen at the end of last year over global
demanding may be subsiding, 2012 proved to be a difficult year for UK
manufacturing as the crisis in the Eurozone, our biggest export market,
has yet to reach any definitive resolution,” he added.

The monthly January survey did show some improvement for
manufacturers, supporting the views things could get brighter.

The January total orders balance improved to -16 from -23 in
December, while the output volume balance rose to 15 from -8. The
expected prices balance rose to 13 from 7.

Data release by National Statistics today showed that manufacturing
output fell 0.9% on the quarter in Q3, and was the principal reason
behind GDP growth turning negative during the quarter.

Overall GDP fell by 0.2% between Q3 and Q4 increasing the risk that
the UK economy will slip back into technical recession in Q1. The wider
measure of industrial production was down 1.2% on the quarter as warm
weather hit output of the utilities industries.

— London newsroom: 207 862 4791; e-mail: dthomas@marketnews.com

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