Manufacturers strongly upgrade growth forecast

This is significantly ahead of the rest of the economy, despite GDP growth being upgraded to 3% from 2.6%, and will be critical in securing broad based growth across the UK economy. The EEF/BDO Q2 Manufacturing Outlook survey reveals a continued positive picture with strong trading conditions evident in all regions and sectors. The positive outlook is being translated into on-going plans to invest and recruit. In particular, recruitment intentions have been positive in all but one quarter back to the first quarter of 2010, and builds on the recent pick up in manufacturing employment reported in official statistics. However, the growth is being driven mainly by strong domestic demand, with export orders falling short of last quarter's record expectations. EEF chief economist, Ms Lee Hopley said: "There is a definite sense of confidence among manufacturers, reflected in a range of recent data releases and the continuing strong positive balances in our latest quarterly survey. This should help sustain broad based growth across the UK. Given that manufacturers' investment plans have been hovering near record highs for several quarters, industry has likely been a significant contributor to the recent recovery in business investment. "There is, however, some uncertainty about the net trade component of better balanced growth. While we see a lot of activity from companies looking to secure new export business, the still uncertain outlook in some parts of the global economy means a turnaround in exporting fortunes in the short term is not guaranteed." According to the survey output and order balances remained strong compared to the first quarter, with output edging up to +26% from +22%, with new orders at +19%, more or less the levels of the previous five quarters. This positive trend is forecast to continue in the next quarter with forward-looking output balances rising to +34% from +29%, while there is continued confidence in the orders outlook with a balance of +32% of companies planning for increased sales in the next three months. While the domestic market continues to be a source of strength with a balance of +16% of manufacturers reporting rising UK sales, the same as the last quarter, the export orders balance eased to +9%, down from +16% last quarter. Despite the disappointing outturn on exports in the past three months, companies are again pencilling in a stronger third quarter. "However, given the mixed international outlook, a strong recovery in exports this year is still uncertain," said the EEF.