July 27, 2011 / 10:07 AM / 9 years ago

CBI factory order balance falls as morale weakens

LONDON (Reuters) - British factory orders fell more sharply than expected in July, with price pressures at their weakest in a 1-1/2 years, a survey showed on Wednesday.

The Confederation of British Industry survey’s total order book balance fell to -10 this month from +1 in June, well below forecasts for a reading of -2.

Firms were less optimistic about output in the next three months, with the output expectations balance falling to +6 from +13 — the lowest since last November.

Companies planned to raise prices at their slowest rate since December 2009, with that balance falling to +4 from +27 in June.

Quarterly data published at the same time showed the first drop in firms’ optimism for 2 years, as export demand weakened sharply.

The figures come after official data on Tuesday showed Britain’s economy put in a lacklustre performance in the second quarter and suggest that there will be little improvement in the third.

“Orders and output growth in the manufacturing sector slowed slightly over the past quarter,” said CBI chief economic advisor Ian McCafferty.

He blamed Japan’s tsunami which disrupted supply chains and the euro zone debr crisis for harming sentiment.

“This slowdown is expected to persist into the third quarter. Consequently, manufacturers are now reappraising their business plans, with firms expecting to lower recruitment in the coming quarter and invest less in the year ahead.”

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