Continued healthy growth in manufacturing

However, the survey highlighted the first signs emerging of a possible impact of the strong pound against the dollar with the balance on export orders falling to its lowest level in almost two years. Uncertainty about the effects of currency and the US economy has also led to a fall in forward looking indicators for export orders with the balance falling from +22% to +9%. The forward looking balance on domestic orders also shows a slightly smaller fall from +17% to +8%. Furthermore, as a result of the strong growth, for the first time there are signs of stronger pricing power beginning to emerge for manufacturers. This could create a dilemma for the Bank of England, with pressure to raise interest rates to tackle rising prices on the one hand only serving to maintain the strength of the pound and damage export prospects on the other. Commenting on the results, EEF Chief Economist Steve Radley, said: “Manufacturers are continuing to enjoy healthy trading conditions at home and abroad and this is being translated into better prospects for investment and employment. However, we may be seeing the first impact of the strength of the pound against the dollar and this is affecting expectations for the rest of the year.” Separately, EEF also used the survey to draw attention to the significant discrepancy which now exists between private sector surveys and official data which, in the last quarter, showed industry on the verge of recession. Martyn Pilley, of RSM Robson Rhodes’ National Manufacturing and Technology Group said: “The outlook for the next quarter looks encouraging with a slowdown in job cuts, further positive feedback on investment intentions and output and orders remaining buoyant. Whilst pressure continues on margins it is encouraging to see signs that this burden is easing. However, the strength of the pound against the US dollar is almost certainly now beginning to have an impact on export order books.”