After five months of strong expectations for increasing output, the balance of manufacturers forecasting growth dipped to 10% in July and has now been followed by an only slightly more upbeat balance of 13% in August. The figures contrast with the average balance from February to June of 22%.
However, demand remained strong this month, with an increased balance of 9% of firms reporting that their order books were above normal. Statistically this is the highest balance since 1995 (just above June’s balance of 8%) but there are marked differences between the manufacturing sectors.
Firms producing capital goods, such as industrial machinery, engines and agricultural equipment, said business was brisk (a strong balance of 30% reported ‘above normal’ order books). Consumer goods producers enjoyed a return to healthy order book levels, from July’s balance of -9% to +8% in August. However, manufacturers of intermediate goods, including components, parts and building materials, suffered a deterioration in demand, with last month’s balance of -3% taking a further knock to -11%.
Across the manufacturing sector, export demand remains healthy, with order book levels considered broadly ‘normal’. The balance of -3% is still significantly above its long term average (-22%). Additionally, after a dip in June, stocks have now recovered to a more than adequate level.
Since the 12-year high in May (a balance of 25%), manufacturers’ confidence in their ability to raise prices has fallen, but the balance of 16% is still elevated relative to the past decade.
