Manufacturing has experienced an encouraging recovery in the second quarter of 2010 and the UK is now likely to avoid a double dip recession, according to the Confederation of British Industry.
In the CBI’s Quarterly Industrial Trends Survey, 38% of its members said output rose during the last quarter, while 15% said it fell. This is the best balance since April 1995.
However, the CBI warned that the pace of manufacturing growth is expected to be slower in the coming quarter. Respondents expect output to grow by a balance of +6%.
According to the CBI’s survey, exports continue to lead the recovery in Q2 with a +18% order balance. However, domestic orders, previously flat in most indicator surveys, now appear to be picking up too with a balance of +10%.
Costs increased heavily in the quarter; +25% is the biggest rise since October 2008. However, despite recent claims by the Institute of Directors and the Forum of Private Businesses to the contrary, the CBI members report that credit constraints have fallen to pre recession levels.
Employment was more or less stable in Q2 and this is expected to be repeated in Q3.
Ian McCafferty, the CBI’s Chief Economic Adviser, said: “With demand for UK-made goods at home and abroad having strengthened, manufacturing production really stepped up a gear during the past three months. Output was also boosted by firms taking action to rebuild stocks.
“Looking ahead, production is expected to rise further, but at a more moderate rate. In our view the risk of a double-dip recession remains low and the fortunes of the manufacturing sector are continuing to slowly and steadily improve.”
The CBI received 439 responses to its survey.