Strong order books and growth add to manufacturing’s recovery

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MANUFACTURERS’ order books remained robust and output growth accelerated in February, according to the Confederation of British Industry.

Output grew at one of the strongest rates since survey records began in 1975, according to the survey of 380 manufacturers.

Optimism about output prospects also improved, with expectations for output growth over the coming three months at their strongest since September.

Total order books improved slightly on January, although they remained below levels recorded in November and December.

Overall export orders also rebounded after a drop in January. The motor vehicles sector was the biggest contributor to the improvement in export orders, recording its strongest performance since October 2011 and underlining the importance of industry to the UK’s economy.

Anna Leach, head of economic analysis at the CBI, said: “The manufacturing sector shows continued signs of improvement with demand high and steady and output growing strongly.

“Growth is increasingly broad-based and firms’ growth expectations are the highest for several months.

“As the UK and global economies continue to strengthen over the coming months, we expect conditions to continue to improve for UK manufacturers and to increasingly feed through to business investment.”

The CBI said 26 per cent of firms reported that total order books were above normal in February, an increase from January and well above the long-run average, although below the levels in December.

The lobby group said 18 per cent reported their export books were above normal, again well above the long-run average.

It added that 41 per cent reported that the volume of output was up, showing an increase from January’s survey.

The CBI said 37 per cent of firms expect output to increase over the next three months.

The firms’ output price expectations remained elevated, although marginally below January’s figure.

The CBI said 22 per cent stated average prices at which domestic orders are booked were up.

“The survey indicated that producer price inflation could be set to rise,” said Jack Allen and Samuel Tombs, analysts from Capital Economics.

“But with a large amount of spare capacity remaining in the sector and input price inflation weakening since last July, it seems unlikely that manufacturers will be able to push through significant price rises in the near term.”

Howard Archer, chief UK and European economist at IHS Global Insight, said the survey indicates overall that the manufacturing sector is performing pretty well in the first quarter of 2014, but has come modestly off the peak levels seen in late 2013.

June Smith, spokeswoman for manufacturers organisation the EEF in Yorkshire, said: “Indicators we’ve seen since the start of the year suggest another quarter of 0.6 per cent expansion in the three months to March, with a pretty even picture across sectors.

“EEF business surveys have been pointing to a decent pick-up in the home market, but the trade data for early February shows the export story has yet to follow.

“However, with more confidence that export demand will gather pace through the course of this year, we should expect the official data to follow suit.”

Manufacturing is important to Yorkshire’s economy and last year accounted for 265,000 jobs.


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