UK manufacturing gains momentum in recovery
The recovery in UK manufacturing gathered steam today as a closely watched survey showed its highest reading for export orders in 15 years.
The latest industrial trends survey from the CBI business lobby group showed 25% of manufacturers said export orders were above normal in December, while 21% said they were below. The balance of 4% was the strongest since August 1995.
The CBI said the majority of manufacturers also reported overall total orders above normal levels this month – giving the best reading since June 2008.
The figures will please the Government, which is pinning hopes for economic recovery on growth in the private sector.
The CBI survey follows yesterday’s positive manufacturing data from the Office for National Statistics, which showed manufacturing output rising 0.6% month on month in October.
Ian McCafferty, CBI chief economic adviser, said: “These figures show that the recovery in the manufacturing sector is well under way.
“With total order books getting back to normal levels and overseas demand particularly strong, the outlook for UK manufacturing output growth is encouraging.”
Mr McCafferty said the decline in the value of the pound should continue to underpin demand for UK exports into 2011.
But he warned: “However, with oil and other commodity prices rising, cost pressures will remain a concern.”
Price pressures are ongoing within the sector with a balance of 16% of firms expecting to raise prices in the next three months, only a slight drop from 17% last month.
But confidence is up in the sector with the number of manufacturers predicting a rise in output over the next three months returning to levels seen earlier this year.
Howard Archer, chief UK and European economist at IHS Global Insight, said the CBI survey showed the manufacturing sector was on course to make a healthy contribution to fourth-quarter gross domestic product growth.
He said: “While manufacturing activity currently looks to be on a firm footing, a key question going forward remains how well can manufacturing activity hold up as stock rebuilding draws to a close, tighter fiscal policy weighs down on domestic demand, and likely slower global growth threatens foreign demand for UK products?”
