08 March 2006

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Business Today

Manufacturers inclined to increase output

The FOI Industry Surveys for January and February 2006 shows that manufacturers are expecting to increase production over the coming months with the number of firms confident of increasing output rising gradually since December 2005 to reach the highest level in 19 months this February.
The FOI has however cautioned that this confidence should be interpreted with care. “A large number of manufacturers are predicting increases in production normally related to seasonal adjustments. At the same time, respondents are anticipating that demand conditions facing the sector will remain weak. In fact, looking ahead to the next quarter, most manufacturers also expect to reduce selling prices in their bid to eventually increase order book levels that have been decreasing for the last three months,” the FOI said.
Stocks of finished products for the four months running as from November 2005 were reported above the survey’s historical average. Besides, the surveys also reveal that the number of firms predicting a fall in their employment levels increased between last December and February this year.
A breakdown by industrial groupings shows that, both in January and February, the Consumer Goods Sector, the Intermediate Goods Sector, and the Investment Goods Sector, all registered positive production expectations. Furthermore, the three sectors recorded a gradual increase in the number of firms expecting output to grow since December 2005.
In terms of order books, the Consumer Goods Sector registered an improvement in February even though they are still quite weak. Correspondingly, the Intermediate Goods Sector registered a substantial decline, whilst the Investment Goods Sector improved in January and slid back again in February.
In the first two months of 2006, stocks of finished products for the Investment Goods Sector were recorded at slightly ‘below normal’ levels. On the other hand, stocks of finished products were registered at ‘above normal’ levels for the Consumer Goods Sector and even more so for the Intermediate Goods Sector. Indeed, the Consumer Goods Sector experienced an increase in the number of firms registering ‘above normal’ levels of stocks of finished products; the Intermediate Goods Sector underwent an opposite trend.
In February, the Consumer Goods Sector recorded an increase in the number of firms predicting a rise in selling prices compared to the preceding month. However, there were more firms in the Investment Goods Sector and the Intermediate Goods Sector predicting a fall in selling prices for the three months to follow, rather than predicting an increase. In both cases, the number of firms in February predicting a fall in selling prices declined when compared to the previous month.
With regards to employment expectations, in February there were less firms in the Consumer Goods Sector expecting to decrease their total employment when compared to January Survey results. However, the February survey registers a slowdown in hiring expectations of the Investment Goods Sector, and a marked deterioration in employment expectations for the Intermediate Goods Sector.
The January Industry Survey was carried out between the 3 and the 30 of January 2006 with 194 manufacturers, employing around 12,444 employees, replying to the survey.
The February Industry Survey was carried out between the 12 and the 27 of February 2006 and 196 manufacturers, employing around 12,602 employees, replied to the survey.
The FOI monitors the outlook of manufacturing industry through its surveys on a monthly basis.

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