Manufacturing exports increase

A surge in overseas demand for

manufacturing goods has lifted export order books to their highest level since 1995, according to the

latest monthly industrial trends survey published today.

The balance of manufacturers reporting export orders to be "above normal" was three per cent, the first positive balance since February 1996 and the highest level since August 1995 (+7%). This represents a marked improvement from October’s balance of minus 11 per cent.

Total order books also improved, regarded as 'below normal' by a balance of minus six per cent, up from minus 20 per cent in October, and more in line with the levels of August and September. All major sectors saw an improvement in total orders, with the capital goods sector the strongest and consumer goods the weakest.

As a result, the level of stocks relative to expected demand is now at its lowest level (+2%) since December 1988 (+1%), and well below the long-term average. However, a balance of five per cent of firms expects manufacturing output to rise over the next three months, pointing to only moderate growth in coming months.

Expectations that average prices will rise are at their strongest since January 2005, when the balance was also 19 per cent. Firms are hoping to improve profit margins after two years of rapid cost growth. The rises are more likely to feed through to consumers - the consumer goods sector's price expectations were plus 19 per cent, up from plus three per cent in October, and the highest since May 1997 (+19%).

Ian McCafferty, CBI Chief Economic Adviser, said: ‘This month has left many businesses pleasantly surprised. Overseas demand for British-made goods has bounced back and total order books have returned to the levels of the summer.

‘Companies expect to increase prices at a slightly faster rate, to recover some of the margins squeezed by high costs, but they also expect output growth to ease.

‘The sector has enjoyed a year of recovery but how long this can continue remains in doubt. Growth has eased in the Eurozone and the

, and with a more moderate outlook for 2007 it seems unlikely that this strong growth will be sustained.’