UK Manufacturing Booming, CBI Industrial Trends Survey Hits Highest Level Since 1988
United Kingdom manufacturing firms have this month reported that both their total and export order books had strengthened to multi-decade highs, according to the CBI’s latest Industrial Trends Survey.
The CBI's survey of 464 manufacturers found that total order books climbed to the highest level since August 1988.
The Survey showed an overall reading of +16, markets had forecast a reading of +7.
“The strength of June’s CBI Industrial Trends Survey suggests that the weakness in the manufacturing output in the hard data should prove to be a blip,” says Andrew Wishart, UK Economist at Capital Economics.
The output expectations balance – which correlates more closely with quarterly growth in manufacturing output – edged back from +28 to +27, but is still consistent with quarterly manufacturing growth of 1.5%, up from 0.3% in Q1.
This confirms expectations for a stronger second-quarter of economic growth following a disappointing first quarter for the UK economy.
Manufacturing export orders still look to be enjoying a boost to demand from the weaker Pound, with the relevant balance rising strongly, from +10 to +13, its highest level since 1995.
Meanwhile, the price expectations balance was unchanged at +23, down from a peak of +32 in February continuing to suggest that price pressures at the beginning of the supply chain are rising less quickly.
“Overall, then, today’s strong survey supports our view that solid manufacturing and export growth will help to offset the slowdown in consumer spending growth this year,” says Wishart.
The strong business surveys witnessed in the second-quarter give some credence to the views held by the Bank of England’s Chief Economist, Andy Haldane.
Haldane raised eyebrows mid-week when he suggested a reversal of the 0.25% interest rate cut implemented by the Bank in 2016 is appropriate.
Haldane cited economic resilience and increased business investment for the call.
Some commentators have suggested the UK economy is in no position to handle any form of interest rate rise. But if economic performance increases substantially, they will be proven to be too pessimistic on the economy.
