Manufacturing builds two-year export peak
UK export orders hit a two-year high this month as a weaker pound drove up overseas demand for goods made in Britain.
The export boost from sterling’s 10 per cent fall against the US dollar to a 31-year low following the EU referendum helped offset the growing pressure on domestic customers as higher import costs are passed on.
A survey of 505 firms by the business lobbying group the CBI found that less than a third of 17 manufacturing subsectors were seeing export orders at below normal levels.
Overall, 34 per cent of businesses reported a rise in output volumes. That compares with 23 per cent seeing a fall, giving an 11 per cent positive balance that was well ahead of an expected 6 per cent.
Output growth is expected to remain steady over the next three months, while the 8 per cent positive balance of companies expecting to raise prices is the highest since February last year.
The CBI’s head of economic analysis, Anna Leach, said: “It’s good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders.
“But the pound’s weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices. Manufacturers will welcome Theresa May’s government’s focus on industrial strategy.”
Paul Hollingsworth, UK economist at Capital Economics, said the outlook data pointed to positive quarterly growth in manufacturing output in the third quarter following a 1.8 per cent rise over the previous three months. The sector generates about 10 per cent of Britain’s economic output. He added: “It is probably too soon to call an export renaissance as there are still big question marks as to what the future of the UK’s trade relationship with Europe will look like.
“But given that all of the existing arrangements remain in place until after we actually leave the EU, the weaker pound should provide a much-needed offsetting boost for manufacturers.”