Manufacturing recovery was well on track: CBI

The survey said the manufacturing recovery was well on track, driven primarily by export orders. Manufacturers saw output and orders growth pick up over the past three months, and expect another solid rise in production during the next quarter. However, prices for finished goods rose markedly, and an even faster increase is predicted over the next quarter, as manufacturers look to pass on higher raw material costs. Commenting on the new data, Chris Williamson, chief economist at market, said the extreme weather in recent weeks, recent volatility in these data and strong seasonality in the data at this time of year caused him to be cautious about reading too much into the greater than expected fall in the survey's order book numbers and other data from the survey, such as output expectations and the optimism shown in the accompanying quarterly survey suggested that manufacturers were fairly upbeat about their prospects for the coming year. He went on: "The ongoing success of the manufacturing sector is especially important as it is a key element of the government's economic growth strategy. However, with the sector only accounting for around 13% of the economy, we remain more concerned about weakness in other sectors, notably the far larger services economy and construction, both of which appear to have slipped back into decline at the end of last year. CBI Chief Economic Adviser Ian McCafferty (pictured) said: "The recovery in the manufacturing sector is firmly in place and looks set to continue. Production has been boosted this quarter by a strengthening in both domestic and overseas demand and, over the next three months, companies expect further growth, driven by another rise in export orders. "It is also encouraging to see that employment prospects in the sector have risen for the second consecutive quarter and manufacturers' confidence is improving. "But manufacturers have come under intense pressure to pass on rising costs: they have increased prices markedly in this quarter, and expect to raise them at an even faster pace over the next three months. This will drive further inflationary pressure in the wider economy."