Industry slipping back, CBI says

THE Confederation of British Industry will this week provide fresh evidence that manufacturing industry may be slipping back into recession.

In a survey to be published on Tuesday, the CBI will strengthen the case for another cut in UK interest rates, even though the Government is unable to make a rate change while sterling languishes at the bottom of the European exchange rate mechanism.

The CBI's authoritative quarterly Industrial Trends survey will reveal that manufacturers have grown more pessimistic about their expectations for output in the next four months than they were in the CBI's monthly survey for June. It will also point to deepening pessimism over future export orders compared with the June poll.

The CBI report will be critical for sentiment in financial markets, which have been shaken by a series of economic indicators pointing to a slide back into recession. In June, 28 per cent of companies surveyed thought their output would improve over the next four months, while some 20 per cent expected a decline. The latest figures will show a lessening of that positive balance of 8 per cent. Likewise, the negative balance of 26 per cent of companies expecting a fall in export orders will worsen.

The CBI is expected to interpret the results of the survey as warning of a second economic relapse, although the danger signals have yet to suggest that a deep downturn is threatened for a second time.

The CBI results will contrast with the British Chambers of Commerce quarterly poll, released last week, which forecast that a hesitant recovery was under way. But the BCC results are based on polling during May and are now out of date.

The CBI survey indicates that the swing from patchy recovery to a threatened resumption of the recession, suggested by recent official figures, has continued. The latest figures show that manufacturing output fell slightly in April and May while retail sales in June dipped for the first time since the general election.