19th June 2014
Hopes are high that second quarter economic growth in the UK will surprise on the upside as the CBI posts strong industrial numbers for June.
The business lobby’s Industrial Trends survey showed that demand for British-made goods rose robustly in June and order books hit their strongest level since December’s 18-year high. Encouragingly the strength was far reaching, with above average results in 14 out of 17 sectors. The food and drink industry did particularly well as it reported its fullest order books in just under four years.
In addition export order books rallied to a level well above the long run average, driven by particularly strong results from the mechanical engineering, electronics and motor vehicle industries.
The survey of 514 manufacturers found output volumes also continued to rise at a similarly solid pace to that seen in the past three months, with expectations of stronger growth for the coming quarter.
Katja Hall, CBI deputy director-general, said: “Demand for British made goods remains buoyant and that’s helped drive this quarter’s further rise in output. Growth is broad-based, with the recovery spreading its roots, and firms have high hopes for the coming quarter.
“However, the recent rise in Sterling could impact on the resilient export orders we’ve seen lately. As a result, now is the right time to capitalise on boosting manufacturing further by taking action to strengthen the UK’s supply chains across industry. This will help unlock further growth and increase exports.”
The report also found that 34% of firms reported that total order books were above normal while 23% said they were below, giving a balance of +11%. Some 39% of firms said the volume of output over the last three months was up and 22% said it was down, giving a balance of +17%. This was broadly similar to the number prevailing for the last three months, at +15%, and significantly above the long-run average of +2%.
Companies are also becoming more optimistic and expect output to grow faster in the coming quarter, with 44% predicting growth and just 12% a decline, giving an overall balance of +32%. This is unchanged since April but a long way above the long-run average of 7%.
A buoyant CBI Industrial Trends survey for June adds to the evidence that the manufacturing sector has sustained a strong performance through the second quarter and has made an important contribution to highly probable ongoing robust GDP growth asserted Howard Archer, chief UK and European economist at IHS Global Insight.
He added: “The survey also suggests that the manufacturing sector is well placed for further strong expansion in the third quarter. The prospects currently look largely encouraging for manufacturers. Much improved consumer confidence, higher employment, a robust housing market and improving consumer purchasing power should bolster demand for consumer goods. Manufacturers will be pleased to see that consumer confidence rose appreciably further in May to be at a nine-year high while consumers’ opinion of the climate for making major purchases was at its highest level since September 2007.”
The UK economy expanded by 0.8% in the first three months of 2014, as consumers spent more and companies engaged in further investment.