Export orders surge to 18-year peak

Export orders have reached their highest level for 18 years, according to the Confederation of British Industry's latest monthly survey of industry. Price pressures remain strong, although not quite as disturbing as had been suggested by the previous survey.

The CBI said 29 per cent of the firms replying to the survey had an above- normal export order book, while 16 per cent reported export orders below normal. The positive balance of 13 per cent was the highest since the survey began in April 1977.

Sudhir Junankar, the CBI's associate director for economics, said: ``British manufacturers continue to do well in overseas markets and this should support export-led growth over the next few months.''

Domestic orders were strong too, with the positive balance of 13 per cent the highest since December 1988. Firms expect output to increase faster over the next four months than at any time in the past seven years.

The price expectations revealed by the survey were extremely strong for the second month in a row, although slightly down compared with last time. A balance of 31 per cent of firms expect to raise prices in the next four months, compared with 33 per cent in January, and 15 per cent six months ago. The strength of price expectations in January's CBI survey was likely to have been one of the factors behind the Chancellor's decision to raise base rates on 2 February.

Kate Barker, the CBI's chief economist, said there were undeniable signs of slightly greater inflationary pressure, but they were not too alarming. Smaller companies, and those producing intermediate and consumer goods, are most likely to seek higher prices in the next four months. The industries where inflation pressure is strongest are pulp, paper and board, textiles, metals, plastics and rubber - all of which have suffered big jumps in the cost of their raw materials.

Ms Barker said: ``It is not surprising that some companies are attempting to raise prices, but it is unlikely that many of them will succeed, given the competitive pressures.''

The CBI also publishes its latest economic forecast today. It predicts growth of 3.2 per cent in national output this year - the same as the Treasury forecast. This is lower than 1994's 3.8 per cent expansion. Headline inflation is forecast to rise to 3.8 per cent by the end of this year.

Separate figures released yesterday showed a 1.9 per cent rise in engineering orders in the final quarter of 1994, to a level 10.6 per cent higher than a year earlier. Engineering sales rose 1.9 per cent in the quarter and 16.8 per cent in the year. Home sales grew more than export sales in October to December, reversing the pattern earlier in the year.