The CBI industrial trends survey for December indicated further weakness in the sector. The headline total orders balance fell further to -23 from -19 previously (consensus: -20, BarCap: -21), reporting the fourth consecutive fall.

The fall in total orders appears to be have been driven by weak demand both at home and overseas as the export orders balance fell to -32 from -31. This weakness in orders books has translated into firms expecting volumes of output over the next three months to fall for three consecutive periods, with the current balance at -8.
 
Price pressure picked up further in November, with the expected average prices balance rising to 7 from 2. Nevertheless, the balance is close to its long-run average indicating that inflationary pressures are not as strong as they were at the start of the year.
 
The December survey indicates the downward trend in manufacturing activity observed over recent months continues (see chart). While the weak economic situation in the euro area (the UK's main trading partner) has clearly had a significant negative impact on the sector, we would point out that the weakness in the domestic economy has also played a significant role. As the outlook for both domestic and overseas demand remains depressed, we expect this downward trend in the manufacturing sector to continue.
 

source: BarCap