Manufacturers ‘more optimistic than service firms’

In a sign that the UK economy is rebalancing away from its reliance on the services sector, BDO's manufacturing optimism sub-index jumped to 120.8, up from 119.4 last month, as growth in the Eurozone helped boost export orders. "The stellar performance among manufacturers has driven the overall optimism index up to 104.3, the highest rating ever in the index's 22 year history," the company said. Further signs that accelerating growth is being driven by manufacturing are shown by BDO's output index, which predicts short-run growth expectations. It rose by 0.1 to 113.0, driven solely by a lift in the BDO manufacturing output sub-index, which jumped from 112.8 to 113.5, far above its long-term average of 100. This positive outlook is also translating into jobs growth, as businesses' hiring intentions showed another large rise in April. BDO's employment index, which reflects expectations for the labour market over the coming three months, rose from 104.3 to 105.6, reaching its highest level since June 2008. On a more cautionary note, BDO's inflation index moved a point higher over April to reach 98.1, indicating that businesses are preparing themselves for upward pressure on prices. Peter Hemington, a partner at BDO, said: "High growth expectations among UK manufacturers is a key highlight of this phase of the recovery, with a stronger manufacturing sector set to benefit the UK in the long term by rebalancing our economy away from London and the City. "However, UK manufacturing is still some way off its pre-crisis peak and confidence in the sector has proved to be volatile in the recent past, impacting negatively on investment and hiring decisions."