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Sterling's fall buoys United Kingdom manufacturers as export orders rise

19 Mai 2017

Driven by faster growth in export orders, the balance of manufacturing companies that reporting their order books were above normal levels was +9% greater than those reporting levels below normal, which was up from a balance of +4% in April and the highest in over two years.

The summer sun has come out early for Britain's manufacturers.

British manufacturing output rose at the fastest pace since the end of 2013, with firms confident of further improvements to come, a new survey shows.

But pricing pressures remain strong, with manufacturers continuing to expect a sharp rise in average selling prices.

The figures are likely to offer some reassurance that the big fall in the pound after last year's Brexit vote, twinned with a strong global economy, will boost manufacturers at a time when consumers are under pressure from rising inflation. "Robust demand at both home and overseas is reflected in strong order books, and output is picking up the pace".

Sterling's slump since the Brexit vote has benefited United Kingdom manufacturers by making their goods cheaper for overseas buyers.

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"On the other side of the coin though, we have mounting cost pressures and expectations for factory-gate price rises are running high", she added. "Sustained investment in innovation and education will be vital to shore up the success of British industry".

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said the Brexit-hit pound and a rebound in world trade were helping the industry.

He said: "The 3% year-over-year growth rate of manufacturing output signalled by the CBI's survey, however, is not sufficient to offset fully the slowdown in the consumer sectors of the economy brought on by sterling's depreciation".

"What's more, the risk that the United Kingdom leaves the European Union without a deep trade deal in place is casting a cloud over the outlook for manufacturing", he added, pointing to the six year low in investment plans and suggesting capacity constraints might bite soon, preventing manufacturers from making the most of sterling's depreciation.

Ruth Gregory, an economist at Capital Economics, said the data provided "another reason to be optimistic" about economic growth in the second quarter, following the UK's 0.3pc expansion in the first three months of 2017.

Sterling's fall buoys United Kingdom manufacturers as export orders rise