Smaller manufacturers are beginning to see the pace of recovery slow. The decline set in at the start of the summer, according to the latest CBI quarterly survey of small and medium-sized companies (SMEs).
Business optimism is broadly unchanged since three months ago, having improved at its fastest rate for two years in the previous survey, while orders have seen a marginal fall.
The past three months saw 30% of companies saying new orders were up and 33% saying they were down, a balance of minus 3%. However, a balance of plus 3% expect an increase in new orders during the next three months.
The CBI says the pause in growth could reflect the initial impact of higher interest rates in the UK, which have risen five times in eight months. There has also been a moderation in demand in previously fast-growing overseas markets, in particular the US. The overall volume of export orders in the past three months had a balance of minus 6%.
Average unit costs for SMEs have risen for the eighteenth quarter in succession, with manufacturers of all sizes affected by rising oil and commodity prices.
SMEs found it difficult to pass on higher costs by increasing prices, with average domestic prices decreasing slightly overall, with a balance of minus 3%. But a balance of plus 3% is expected over the next three months, ending a seven-year decline.
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