Rising demand at home and abroad is underpinning the manufacturing recovery in the UK despite the increasing strength of the pound.
The CBI’s latest monthly Industrial Trends survey, published today, shows the level of order books still below normal but better than for three years. Despite a sharp rise in the value of sterling, export orders were broadly similar to the last three months and much healthier than during most of 2003.
Of the 929 manufacturers who responded to the survey, 30% said orders were below normal while 15% said they were above normal. The balance of -15% compares with -18% in January.
-15% is the highest since January 2001 when it was -10%.
Capital goods industries – such as those making plant and machinery – did best along with makers of intermediate goods, such as tools and components. Consumer goods – such as televisions, and clothes slipped back slightly.
Export orders were sharply up on 2003. A balance of -22% of firms said export orders were below normal. This is significantly better than last year’s figures which mainly hovered above 30%.
In January, output expectations had been the highest for nearly five years, perhaps because stocks were being replenished. This month stocks were back at the long term average and continuing to rise. That means expected output growth is more modest than in January, but this month’s positive expectation still contrasts sharply with the relentless falls in output experienced during 2003. In this survey output expectations were above the average of the last 20 years.
CBI Head of Economic Analysis, Doug Godden, said: ‘The US-led recovery in global demand is clearly benefitting UK manufacturers. Both total and export order books have improved significantly since autumn. Output expectations are positive and prices in the sector appear to have stopped falling. The weak dollar remains a threat to UK industry, but, at least so far, its effects are being outweighed by improving market conditions overseas.’
The monthly Industrial Trends survey was carried out between 27 January and 19 February 2004. 929 manufacturers responded to the survey. During the period, sterling averaged 1.47 Euros (DM2.87) and $1.85 compared with 1.43 Euros (DM2.79) and $1.79 in the January survey.