MANUFACTURING DEMAND STRONGEST IN 20 MONTHS - CBI SURVEY
UK manufacturing is enjoying improving demand, with the level of total order books at its best in 20 months, August’s Monthly Industrial Trends Survey by the CBI reveals.
The improvement this month appears to be driven by domestic demand, as the level of export order books is unchanged on July. Firms remain hopeful of passing on more of their increasing costs to buyers by increasing domestic prices.
A balance of eight per cent of manufacturers reported that total orders were below normal. Although negative, this figure is the strongest since December 2004 (-4%) and an improvement on last month (-11%).
The increase is mainly due to stronger demand in the capital goods sector - which includes shipbuilding, aerospace and industrial machinery - coupled with a more modest improvement in consumer goods. Together this offset a deterioration in the intermediate goods sector, which includes hand tools and industrial chemicals.
A balance of 11 per cent of manufacturers expects the total volume of output to increase over the next three months. This figure is slightly lower than in both June and July, but the pace of growth is similar to that seen over the first half of 2006.
A balance of 13 per cent of firms say they expect to increase average prices over the next three months - the highest level in 20 months (January 2005, +19%). This suggests the pressures to increase prices are intensifying, although recent surveys have shown that actual price rises lag far behind expectations.
CBI Chief Economic Adviser Ian McCafferty said:
"The outlook remains encouraging for UK manufacturers. But it is disappointing that export orders have not improved more, given the current revival of the Eurozone economy, our principal export market.
“Manufacturers have absorbed surging energy and raw material costs for many months, which has meant a big squeeze on profits. With better demand, it is not surprising that more firms hope to pass these on in the form of higher prices.
"However, with continuing intense international competition, opportunities to do so will remain limited."
23 August, 2006
Notes to Editors:
1. A balance is the difference between the per cent of manufacturers reporting an increase and those reporting a decrease.
2. The August CBI Industrial Survey was conducted between July 25 and August 16 2006 and there were 682 respondents.
3. The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce.
Media Contact:
CBI press office 020 7395 8090, out-of-hours pager 07623 977 854.
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