Healthy Growth In Manufacturing Orders

Manufacturing has seen positive growth in new orders across most UK over the past three months, despite the impact of the global credit squeeze on confidence.

The latest quarterly Regional Trends Survey, published by the CBI and Experian, showed that recent financial turmoil has depressed business confidence and export optimism in virtually all regions, but there is little evidence that it has inflicted serious damage on manufacturing activity in the past three months.

Order volumes have held up remarkably well, according the report, rising at the national level for the fourth quarter in a row. This is underpinned by marked growth in Yorkshire and the Humber, the North West, the East Midlands, the West Midlands, the South West and the South East and London. The North West saw the strongest orders growth since records began in 1988, and the South East and London the sharpest rise since mid-2000.

Buoyant demand in these six regions was underpinned by the strength of export orders, which showed some of the strongest gains of recent years during the quarter (again, the strongest on record for the North West).

Strong output growth was also reported across these regions. For London and the South East, after nine months of steadily rising output, the region posted its strongest increase since 2000.

Elsewhere the picture is more subdued but still positive, with modest rises in export orders supporting total demand. Output at the national level remains largely unchanged, but fell back markedly in Wales, the North East, and Scotland.

However, looking ahead, expectations for new orders in the coming three months are at their weakest for almost two years at the UK level, although they are still marginally positive. The most downbeat regions are Wales, the West Midlands and Scotland, who all expect a decline, but the East Midlands continues to stand out with a persistently positive outlook.

The overall UK employment fell again over the past three months, but at a slower rate than was expected. According to CBI/Experian estimates based on the survey results, 7,000 manufacturing jobs were lost in the July September quarter, well down from the quarterly average since 2003 of around 30,000.

'Manufacturers expect a slowdown in orders growth going forward, but this is hardly surprising given the backdrop of higher interest rates, said CBI principal economist Lai Wah Co. However, this weaker pace of demand may make it harder for firms to pass on higher costs in the face of sharp rises in oil and commodity prices.

'It has yet to be seen whether the credit squeeze will depress confidence still further, and indeed to what extent the manufacturing sector will be affected in real terms.'