Manufacturing performs well despite slowdown

Manufacturers in the UK saw order books grow in January despite the slowdown in the world economy, the CBI has reported.

According to the CBI’s latest Industrial Tends survey, January orders rose at the same rate as in December, with a balance of plus 2 per cent of firms reporting that sales were above normal for the month.

On a quarterly basis, 28 per cent of firms said that total new orders increased during the three months to January, while 17 per cent reported a fall. The balance of plus 11 per cent exceeded expectations.

The CBI said that demand during the quarter had been fuelled for the most part by export orders, helped by the weaker pound, although much of the currency’s depreciation occurred after the survey was carried out.

However, manufacturers were less upbeat on the future, with a balance of 18 per cent of firms less optimistic about the business situation than they were three months ago.

Ian McCafferty, the CBI’s chief economic adviser, said: “Manufacturers share similar concerns to other sectors about the economy – a fear that rising costs might become combined with slowing demand.

“Thankfully, the expected wobble in demand didn’t materialise in the last three months and orders for British-made goods have held up, particularly from abroad. What we are seeing is part of a necessary rebalancing of the economy, in the face of slowing consumer spending.”

Mr McCafferty added: “The dilemma the Bank of England now faces over interest rates is to weigh risks of a slowdown with the real and present pressure on prices in both factories and other areas of the economy. Price pressures from oil and food costs will bring higher inflation in the short-term and may push the inflation rate further above target during 2008, making the Bank’s decision even more difficult.”