Manufacturing sector 'optimistic'

27-07-2006

A drop in domestic demand failed to dent the optimism of Britain's manufacturing sector, according to the latest industrial trends survey from the Confederation of British Industry (CBI).

The quarterly poll of manufacturers found a six per cent positive balance in favour of improving orders during the next three months, resulting in a commensurate slowing in manpower reductions.

Despite this positive outlook among manufacturers, present order book levels are "below normal" with a 12 per cent balance towards negativity, while profit margins continue to be squeezed by rising energy costs and falling inventories of finished goods.

"The recent improvement in the fortunes of UK manufacturers has continued to be led by exports and the strength of global demand," said Ian McCafferty, chief economic adviser for the CBI.

"If the expectations of UK firms for the near term are met, growth in export orders will rise further, to the fastest rate in a decade. But domestic orders remain sluggish, and it is unlikely that the current strength in the global economy will continue into 2007."

Components, parts and building materials were the main sub-sectors boosting export orders, for which the CBI survey registered a seven per cent growth on balance in the last three months.

The most recent purchasing managers' index from the Chartered Institute of Purchasing and Supply (CIPS), released earlier this month, set UK manufacturing on the beginning of a recovery from a long period of decline.

Observers have suggested that if domestic demand does not improve and export prospects begin to falter in the face of sustained high energy costs, the present recovery could begin to come under threat.


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