UK factory orders contract again but price pressures ease – CBI

LONDON (Reuters) -British factory orders and output contracted as stocks of finished goods piled higher, according to a survey on Tuesday that underlined the recent weak performance of the manufacturing sector but also pointed to easing inflation pressures ahead.

The Confederation of British Industry’s (CBI) monthly gauge of industrial orders held at -20 in April, unchanged from March’s reading that had marked a more than two-year low.

The survey’s measure of stocks of finished goods rose to +19, the highest reading since August 2020, pointing to weak output in the months ahead.

On the plus side for the Bank of England as it ponders how much further to raise interest rates to curb the jump in inflation, cost pressures receded further.

In a further sign of a cooling labour market, the CBI said employment expectations for the coming three months touched their lowest reading since January 2021.

“Growth in average costs per unit of output and growth in average domestic prices have now slowed for four successive quarters. Manufacturers expect growth in costs and domestic prices to ease further in the quarter to July,” the CBI said.

Separately on Tuesday, BoE Deputy Governor Ben Broadbent said there were signs that price pressures were reducing despite stronger-than-expected consumer price inflation in March.

A closely watched S&P Global/CIPS survey published last week showed a surprise surge in services sector activity, but another contraction for manufacturing.

Output in the factory sector has been largely flat since mid-2022, along with the broader economy, with construction the sole bright spot, according to official data.

The CBI’s quarterly measure of manufacturing business sentiment rose to -2 from -5. While still in negative territory, it marked the highest reading since October 2021.

(Reporting by Andy BruceEditing by William Schomberg)