UK monthly factory orders rise, sees output growth slowing

UK factory orders rose more than expected in November, but the manufacturers expect the output growth to slow in the next three months.

Total order book balance in UK rose to -15 in November from -28 in October, showed the Confederation of British Industry (CBI)’s survey on Thursday.

Markets had expected the order book balance to rise to -24 in November.

“Manufacturing demand improved in November, following October’s more negative figures for total and export orders. Demand is now back in line with that over the summer months, suggesting that particularly weak order book readings last month may have been a one-off,” said Ian McCafferty, chief economic adviser, CBI.

However, firms’ expectations on the output in the coming months fell sharply, with the corresponding balance dropping from +18 in October to +4 in November, the lowest since the beginning of the year.

“Factory output is still set to rise, albeit with modest expectations for growth compared with recent months, as the boost from re-stocking starts to fade,” said McCafferty.

Further, firms said that they plan to increase the prices in the coming months, fuelling the inflation worries in the country. Corresponding balance rose to +17 from +6 in the previous month, the highest since March.

“Inflationary pressures are a concern, with companies saying they will be increasingly forced to pass on at least part of their rising costs in the form of higher prices,” McCafferty said.

Inflation in the U.K. rose during October, mainly pushed by fuel and lubricant prices and continued to remain above the 2 percent target set by the Bank of England, according to the U.K. Office for National Statistics.

Consumer price index annual inflation was 3.2 percent in October, and continued to be above the target of 2 percent for the eighth consecutive month.

The BoE has kept interest rates constant at 0.5 percent for the past several months in an attempt to contain inflation.

Last week, the BoE had stated that the CPI is likely to stay above the percent target for 2011, given the forthcoming rise in VAT and continuing increases in import prices.