Manufacturing recovery continues apace, says quarterly survey

The third quarter 'Manufacturing Outlook' report reveals that recovery, which began at the end of last year, has been sustained with output and orders balances reaching record levels since the survey began in 1995 for the second quarter in succession. This performance continues to be driven by the strength of overseas markets, with new analysis published by EEF showing a close relationship between exposure to export markets and company performance. Greater confidence across the sector is also continuing to translate into some recruitment, albeit anecdotally this is being driven by temporary or agency working which will give employers flexibility should demand begin to slow. Uncertainty about future demand had been dampening investment plans, but a number of sectors are now planning to increase in investment. The positive investment intentions posted this quarter breaks the pattern of previous recessions by recovering at an earlier stage in the cycle. However, the short-term optimism highlighted by EEF's survey is shaded with a degree of caution about the risks to growth in 2011. As fiscal consolidation really gets underway in the UK and others follow suit, together with the weaker outlook for the US and risks to the sustainability of Asia's growth path, the recovery could yet falter. Commenting, EEF Chief Economist, Lee Hopley (pictured), said: "Manufacturers have continued to reap the rewards of growth in overseas markets with the upswing being felt across all sectors and regions. Not only has this continued to translate into better employment prospects but the recovery in investment has begun much earlier in the cycle than after previous recessions. "However, we have to maintain perspective that the recovery is coming from a very low base and the risks to the economy in the medium term haven't gone away. The rebound in exports and modest improvement in investment will need to become much more firmly entrenched if we are to see a much-needed rebalancing of the economy." EEF also published its latest forecasts for the UK economy and manufacturing. These show the economy growing by 1.5% and 2.1% in 2010 and 2011 respectively while manufacturing will grow by 3.7% in 2010 before easing back slightly to 3.2% in 2011.