Manufacturers face gloomy outlook

Expectations for the next quarter are at a seven-year low, according to a survey of UK manufacturers.

The CBI survey found that a third of the 600 businesses polled believed output would fall over the next three months, representing the worst forecast since December 2001.

In addition, a balance of 13% of companies judged demand for goods was already below normal, matching April's 18-month low.

The survey, which is carried out monthly, showed the forecast continuing to deteriorate in August after July had shown the first negative outlook for manufacturers in two years.

CBI chief economic advisor Ian McCafferty said domestic conditions are sluggish and warned that the downturn in eurozone economies would make conditions tougher for UK exporters, even though a weaker pound would be welcome.

"Manufacturers are becoming more downbeat about forthcoming levels of activity, but are still having to raise their prices due to the severity of recent cost increases," he said.

Despite the gloomy predictions, the CBI is not warning of recession. Its most recent economic forecast, published in June, predicts UK GDP will slow from 1.7% this year to 1.3% in 2009.