UK Expected Output Turns The Corner As Total Orders Drop

UK industrial orders according to the CBI up-minus-down net balance indicators fell in October. At a reading of -51 the orders index is above its cycle low of -59 but down from September’s -48. Export orders at a still weak -46 were flat at September’s level and that strings the improvement out from the reading of -52 which was the cycle low back in June. The volume outlook index crossed over from negative to positive posting a +4 reading compared to the -2 it registered in September. This switch ends a fifteen month string of negative values for expected output.

The optimism on expected output is a good sign and one that has been long in coming. Still, the orders series remain very weak and lacks any real upward momentum. The orders series are holding their levels but these are still deeply negative readings that indicate orders are not stable but contracting. We have seen some recent readings on foreign orders elsewhere that have been spotty. In Germany, and more recently, Italy, their reports showed that ‘foreign’ orders have become irregular and progress has been set back at times. Of course, ‘foreign order’ has different meaning in different countries. While Germany rebounded from a one-month back track in its foreign orders reading, it is Italy’s newest reading that has gone negative. UK orders are weaker and its foreign orders are flat. There is more than one sign in the EU that the turn to growth may not be a smooth one. Still, UK firms are optimistic about future output trends. And that should count for something.