Demand improves for UK manufactured goods

According to the CBI's latest industrial trends survey, demand for UK-made goods improved in November, compared with the previous month. However, manufacturers also expect prices to rise faster in the next three months, and predict slower growth in manufacturing output. The business group said total and export order books improved relative to October, although they were still considered to be 'below normal'. Responding to the latest monthly survey, 21% of manufacturers said that total orders were above normal and 36% said they were below. The resulting balance of -15% is considerably better than last month's -28% and slightly better than the survey's long-run average of -18%. Firms also reported that export order books were better than in October, even though they were still considered below normal. Modest growth in output is expected ove the next three months. Commenting on the figures, Barclays head of manufacturing Graeme Allinson said:"Today's CBI figures bring more positive news to UK manufacturing, although caution remains in the sector when looking ahead to the final months of 2010. The axe that has been taken to public spending appears to have not had an immediate effect on the fortunes of manufacturers, and with higher than expected Q3 GDP also reported, it is hoped the sector will continue to bounce back strongly. "However, challenges continue to loom for manufacturers and an ongoing lack of investment in comparison to key international competitors looks set to keep UK manufacturing well behind the global curve." "Healthy export books will be essential over the coming months, and with more than half of UK goods manufactured bound for export the Government's efforts to expand trade links with the East should bring new opportunities and bolster the sector somewhat." The CBI's chief economic adviser Ian McCafferty (pictured) said demand was now back in line with that over the summer months, suggesting that particularly weak order book readings last month may have been a one-off. He went on: "Factory output is still set to rise, albeit with modest expectations for growth compared with recent months, as the boost from re-stocking starts to fade. "Inflationary pressures are a concern, with companies saying they will be increasingly forced to pass on at least part of their rising costs in the form of higher prices."