The contraction in manufacturing output is easing, but a return to growth could still be some way off

The volume of manufacturing output continued to fall in the three months to July, with 43% of firms saying it declined, and just 12% of firms saying it rose, giving a balance of -31%. This figure represented a slower rate of decline than the previous three months, when the balance was -53%.

However, a return to growth could still be some way off, with expectations for the coming three months remaining negative.

Manufacturing firms have run down their stocks even more aggressively over the past quarter, with stocks of finished goods reduced at the fastest rate in the 51 year history of the survey (a balance of -23). Despite this rapid rate of destocking, stock adequacy remains high and firms plan to reduce their finished goods inventories at a similarly sharp rate next quarter (a balance of -25).

Export demand was also disappointing, despite the relative weakness of Sterling, which makes British goods cheaper for foreign customers. The balance reporting a fall in export orders over the last three months was -38%, compared with -39% the previous quarter, and expectations last quarter of -18%.

The sharp fall in export orders came despite firms cutting prices in foreign markets. The balance for export prices was -26%, from -10% last quarter, compared to a balance for domestic prices of -20%, from -17%.

The survey also showed that employment in the sector is continuing to fall sharply. 47% of firms reduced numbers employed and just 6% increased, giving a rounded balance of -42%.

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