By Max Clarke

The UK’s manufacturers have defied predictions and are anticipating growth over the next year, the Confederation of British Industry (CBI) have said.

A survey carried out by the business organisation revealed greater optimism in the vital sector, as global spikes in commodity prices have begun to erode, reducing the high levels of input price inflation.

The news comes after recent slowdown in UK manufacturing sector cast doubts on the Vince Cable’s much touted manufacturing-led recovery.

Of the 510 manufacturers responding to the CBI’s survey, a third of firms described total orders as above normal, and the same figure said they were below- a net difference of 0, compared to the strongly negative figure last month.

“Manufacturing order books are holding up, and expectations for output growth are above their historical average, although they are less strong than earlier this year,” commented Richard Woolhouse, CBI Head of Fiscal Policy.

The CBI’s research shines a ray of hope onto the UK economy following what had been a month of bad news in the face of high inflation, rising unemployment and even a brief contraction in the manufacturing sector.

While 24% of firms said export order books were above normal, an equal 24% said they were below. The resulting balance of 0% compares with -8% in July, and is also significantly above the long-term average (-21%).

Expectations for growth in factory output over the coming quarter have picked up a little. 31% of firms predict that production will rise in the next three months, and 17% anticipate that it will fall. While the resulting rounded balance of +13% remains above the long-term average (+6%), it represents a continuation of the broader trend of moderating expectations since April.

Pricing pressures have eased in comparison with the first half of 2011 and remain fairly modest. 19% of manufacturers predict that they will raise output prices over the coming quarter, and 10% expect to lower prices, as Woolhouse comments:
“Inflationary pressures have eased since the start of the year, with fewer firms predicting they will have to raise prices at the factory gate over the coming quarter.

Pressures, however, remain as the global economy once more teeters on the edge of financial collapse. Continues Woolhouse:

“But the risks to manufacturing activity and business confidence have if anything increased, due to market volatility and the recalibration of growth expectations worldwide. Concerns around growth in the US and the Euro area present further challenges to the manufacturing recovery.”

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