Decline in factory orders raises fears about economy

Figures released by the Confederation of British Industry (CBI) today revealed a significant fall in manufacturing orders in July.

According to the CBI, orders fell at their fastest rate since January 1992, raising new concerns about the state of the economy.

In its quarterly health check of industry, the CBI found that in the three months to July, 43% of firms reported a fall in output, while just 12% of firms said business had improved.

The CBI’s gauge of orders fell to -59 from -51 and well below the -45 reading expected.

Ian McCafferty, chief economic adviser to the CBI, said: “These figures reinforce our view that the road out of recession will be long and slow.”

“The further sharp decline in export orders is of particular concern as we are not seeing much of a boost from the relative weakness of sterling. There are also further indications that the inventory cycle may not be turning as quickly as many had hoped,” added Mr McCafferty.

Commenting on the CBI’s figures, Howard Archer, chief UK and European economist at IHS Global Insight, said concerns are now being raised about the UK’s economy recovery prospects.

In other news today, the National Institute of Economic and Social Research (NIESR) is forecasting a slow recovery in the UK.

The research body is expecting total UK Gross Domestic Product (GDP) to fall 4.3% this year before experiencing modest growth of 1% next year and 1.8% the year after.

Earlier this month, the Office For National Statistics (ONS) confirmed that the UK economy shrank by 2.4% in the first quarter of 2009 - far worse than expected and the biggest quarterly decline in 51 years.

The ONS is scheduled to report the first estimate of second quarter GDP later this week.

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