DIYWEEK.net

Manufacturing production rose in the UK for the first time in two years, as overseas demand increased and stock reductions eased.
The latest quarterly Industrial Trends Survey revealed a stronger-than-expected rise in output in the three months to January.

31% of manufacturers said that output rose during the three-month period, while 20% said it fell. The resulting balance of +11% is the strongest figure since January 2007.

Export orders also rose for the first time since January 2008, boosted by the relative weakness of the sterling and improving global demand for UK-made goods. 30% of firms said that exports grew in the three-month period, while the figure is expected to grow more strongly in the next quarter. Encouragingly firms are the most optimistic they have been about export prospects for the coming year since July 1995.

However, the Confederation of British Industry (CBI), who carried out the survey of 461 manufacturers, warned that the outlook for the sector still remains uncertain, with domestic demand still weak and some firms still struggling to access finance.

Firms are continuing to de-stock, but at a slower rate, which has helped lift output but domestic demand was weaker than expected with 18% of manufacturers reporting a rise and 26% a fall.

The availability of finance also remains a concern and is cited by 13% of firms as a factor likely to limit output and by 12% as likely to limit export orders.

Despite this, sentiment about the overall business situation is continuing to improve, with a net 12% more optimistic than three months ago.

CBI chief economic adviser Ian McCafferty said: "After nearly two full years of falling output, manufacturers are seeing a return to modest growth, thanks in part to improved overseas demand and much slower stock reductions.

"It is encouraging that the weaker pound is now providing firms with some respite as global demand improves. Exports are rising for the first time in two years, as UK-made goods are looking more attractive in overseas markets. Manufacturers are also feeling upbeat about export prospects for the year ahead.

"However, the manufacturing sector is not out of the woods. With domestic demand still weak, and credit remaining constrained for some companies, firms expect growth to be more modest in the next quarter. This underlines our view that the UK's economic recovery will be slow and protracted."