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UK CBI factory orders see fastest growth since February 2015 in May

Reuters Reuters
Manuel Armenta | 19 May, 2017, 19:10

"The improvement in the export orders balance, to its joint highest since December 2013, indicates that the drop in the pound is still having substantial positive effects for manufacturing exporters", said Ruth Gregory, UK economist at Capital Economics.

Domestic and overseas demand helped order books to swell to their highest since February 2015, while export orders matched the three-year high seen in March.

A survey by the business group showed robust growth in the mechanical engineering and chemicals sectors pushed output up at the fastest pace since December 2013.

The survey, which gathered responses from 432 manufacturers, said 37% of firms are expecting robust output growth over the coming quarter, with 10% expecting a decline, leaving the balance at plus 28%.

"Robust demand at both home and overseas is reflected in strong order books, and output is picking up the pace", said Rain Newton-Smith, chief economist at the CBI.

In addition, the balance of manufacturers expecting production to rise over the next three months increased to +28 in May, from +16 in April, albeit remaining below March's recent peak.

The survey was conducted between 25th April and 12th May. The EEF, which represents manufacturing firms, said last week that orders were improving as United Kingdom exporters enjoyed an improved competitive position "vis-a-vis the pound depreciation" and global growth picked up strongly from a dip a year ago.

The CBI pointed out that although orders and output were up at United Kingdom factories, manufacturers were facing higher costs for imported raw materials.

"On the other side of the coin though, we have mounting cost pressures and expectations for factory-gate price rises are running high", she added.

The figures are likely to offer some reassurance that the big fall in the pound after last year's Brexit vote, twinned with a strong global economy, will boost manufacturers at a time when consumers are under pressure from rising inflation.