UK CBI Industrial Orders Slow And Show More Weakness

UK GDP registered a -0.2% reading for 2012 Q1 showing that the economy has not yet been able to escape the pull of recession. The industrial orders series shows that weakness remains in train, but with a forward-looking twist. While the GDP data are fresh for Q1 and still preliminary, the CBI survey is complete for Q1 and already is streaming a data flow from deep into Q2.

There have been eight straight months of negative orders from this survey. Even so, there was an orders revival (smaller negative growth rate) in February. And, for now, on the other side of that dip and revival orders are declining at pace that is up from its lows. At a -8 net reading in March the order series is above its average of -10 over the last 12 months. Export orders at -10 are above their 12-month average of -13 as well. There is some sense of progress.

While the absolute numbers look weak that is the characteristic of this series. Overall orders are stronger than this reading only 25% of the time. Export orders are stronger only about 30% of the time. These readings are actually quite solid but still well short of strong.

Looking ahead the outlook seems quite good. Expected output volume over the next 3mos is rated at a +24; that is the same as the reading expected for the previous two months. It is a reading that, historically, has been exceeded only 4% of the time. Clearly there is still a good deal of optimism on the part of industry.

On the face of it, the outlook is quite surprisingly strong. After the high (small negative) orders reading in February firms became optimistic. But the orders growth has since backtracked from this February high and stayed there. Yet the optimistic outlook was elevated in February and it has stayed there too. With the UK economy still struggling and severe economic problems and tensions on the continent it is hard to puzzle out exactly why UK industry is so positive.