Exports rebound

The manufacturing recovery gathered momentum in May as demand from home and abroad pushed total order books up to a six-year high, according to the CBI’s Monthly Industrial Trends survey published today.

Export order books edged up in May, helped by stronger global demand and an easing in the strength of sterling against the dollar and the euro. 21% of firms said export order books were above normal against 24% saying they were below normal. The balance of minus three is the least negative since February 1996.

Total order books rose to near normal levels in May, with manufacturers reporting the highest balance since February 1998. 24% of firms said their order books were above normal while 23% said they were below. The positive balance of plus one compares with minus 14 in April.

Capital goods manufacturers reported order books well above normal, while producers of consumer and intermediate goods said orders were below normal. But, both sectors showed a marked improvement on six months ago.

Strengthening demand and declining stocks have resulted in output expectations at their strongest since May 1999. All sectors, apart from textiles and motor vehicles, expect to increase output over the coming three months, with metal manufacturers and electrical engineers forecasting the sharpest rise in production.

The survey indicates that downward pressure on prices will ease over the next three months. This could help mitigate the impact on profits of recent rises in commodity and oil prices.

“All the signs in this survey point to the manufacturing sector going from strength to strength as orders from home and abroad continue to pick-up. However, with global competition fierce, manufacturers may still struggle to restore their profit margins, especially in the face of increased oil and other commodity prices,” said Doug Godden, CBI Head of Economic Analysis.

The survey was carried out between 27 April and 19 May 2004 and 882 manufacturers responded. Between the April and May survey periods sterling depreciated by 2.7% against the dollar and 1.3% against the euro.

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