British manufacturers are enjoying their best run for exporting since 1995, says the Engineering Employers’ Federation (EEF) in a report out today.
The EEF survey found that a balance of 14 percent of the 1042 firms which responded to its survey said exports orders had increased. It’s the fourth quarter in succession that has seen a rise in reported export orders, the longest period of uninterrupted growth for eleven years.
The EEF had more good news. It expects price rises from the manufacturing sector to ease this year. However, the survey had domestic orders flat.
So does that mean the UK economy’s woes are over? Does that mean we can stop fretting about inflation, the Bank of England can take its pedal off the interest rate, and that our export markets have come to our rescue? Does it mean that just as our consumers start feeling the pinch, our cousins in the Euroland and the US will start buying the products we make?
The EEF survey certainly reveals a remarkably rosy picture. It’s not the first time we have had good news gushing out of the EEF either. Three months ago it also reported a surging export market, and said the sector’s indicators were at their best level for ten years.
Unfortunately, there are reasons to be cautious. First, the EEF findings are not backed up elsewhere.
This weekend, the Chartered Institute of Purchasing and Supply revealed the findings of its latest survey. And, alas, the CIPS index for new export orders fell dramatically in August, from a healthy 53.9 in July to just 48.3. CIPS has the 50 mark as representing no change.
And while the EEF tells us inflationary pressures from the manufacturing sector are easing, CIPS had the opposite story to tell. The CIPS index for prices paid by manufacturers now stands at a massive 69.7, the second highest score since inflation started to rear its ugly head during this cycle. There was small relief though; the index actually fell from last month, when it went over 70.
As for the prices our manufacturers charge, here there’s bad news on two fronts. The index hit 55.3 in August, which just like the prices charged index was slightly better than July’s reading, but still the second worst score for some time. So, the high prices manufacturers are charging are partially being passed on, meaning inflationary pressures for UK plc are building. But, but while our beleaguered manufacturers pass some of the extra costs on, they are still being forced to absorb the remainder – hitting margins, which are already very tight.
But, it was not all bad news from CIPS. While the CIPS Purchasing Managers Index did fall slightly in August, from 53.8 to 53.1, it’s still comfortably above the critical 50 no change mark. It has been above this level now for 12 months.
But the big issue we have with the EEF findings is this. It’s not that we question their accuracy; it’s just that things are changing. The US economy is slowing fast, and there are growing fears the eurozone recovery might have peaked. Put that together and it would seem unlikely manufacturers will continue to see exports rise, unless we see a well needed fall in Sterling.Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link
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