Hopes that industry can take up some of the slack in Britain’s faltering economy were undercut again today as the CBI reported that manufacturers’ expectations of future output sagged to a seven-year low this month.

The growing mood of gloom among manufacturers over prospects for production came as their order books declined for a second month in a row this month, and by more than they had expected.

The CBI’s gauge of total manufacturing orders fell to minus 13 for this month, from a reading of minus 8 in July, while its barometer of expected future output sank from minus 7 to minus 13, the lowest level since December 2001.

Concern over weakening conditions was fuelled by a recent spate of bleak news over a worsening economic outlook in the eurozone, Britain’s biggest export market.

Flagging European growth threatens to undermine UK export sales, despite the boost to competitiveness from a steep slide in the pound to 11-year lows on its trade-weighted index.

“Domestic conditions remain sluggish and the recent slowdown in the eurozone economies is starting to make conditions tougher for UK manufacturing exporters, although the weaker pound will offer some relief,” Ian McCafferty, the CBI’s chief economic adviser, said.

Worries over export prospects were heightened today as a purchasing managers’ survey of exporters from Euler Hermes reported that overseas sales sank last month for a second month in a row, and at the fastest pace since November 2001, in the aftermath of the September 11 terrorist attacks on the United States.

In a brighter note, the CBI’s survey showed some sign of respite from the relentless rise in cost and price pressures in industry that could boost the chances of eventual cuts in interest rates.

In news that will offer some reassurance to the Bank of England, the CBI’s gauge of price pressures in industry fell to plus 31 for this month, down from an 18-year high of plus 34 last month.

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