Economic and political uncertainties sour mood

London: Small and medium-sized manufacturers are in a gloomy mood after output stagnated and orders fell in the three months to January against a backdrop of economic and political uncertainty, according to a survey by the CBI employers' group.

The findings contrast sharply with last week's Markit purchasing managers' index survey for manufacturing, which showed new orders increasing and output expanding at the fastest pace since March.

Of 350 respondents to the CBI's quarterly SME Trends Survey, 26 per cent said output rose, while 25 per cent said it fell, with the resulting balance of +1 per cent marking the first time output has not risen since April 2010. Production is expected to remain broadly flat — a balance of plus three per cent — in the coming three months.

Domestic orders fell for a balance of minus 17 per cent of companies and export orders fell for the second quarter running (minus 10 per cent), both at the fastest rates since October 2009.

Gloomy outlook

In the next three months, companies expect domestic demand to fall further but predict export orders will stabilise. Concern over political and economic conditions abroad has risen sharply, with one-third of companies saying this would limit export orders, the highest proportion since October 2008.

Sentiment about the general business situation fell for the third quarter in a row, with a balance of negative 20 per cent of companies less optimistic than three months ago, as did sentiment on export prospects.

Lucy Armstrong, chair of the CBI's SME council, said: "Sentiment among small and medium-sized manufacturers fell sharply again in the past three months, brought down by rising concerns about the ongoing Eurozone crisis."

— Financial Times