Exports recover from pounding

Export orders are beginning to stabilise after the hammering they took at the hands of the strong pound earlier in the summer but they still remain weak, the Confederation of British Industry reported yesterday.

At the same time, new figures on money supply, mortgage lending and car output painted a picture of a relatively subdued economy. This contrasts sharply with the retail sales and average earnings figures published earlier in the week which pointed to the need for a further increase in interest rates.

The CBI's latest monthly trends inquiry shows that the balance of manufacturers reporting lower-than-normal export order books has improved slightly from 37 per cent in August to 35 per cent in September. Between the two surveys, sterling fell by 4 per cent against the German mark from DM3.01 to DM2.89.

The CBI said that despite the decline sterling's strength was continuing to have a dampening effect. Yesterday the pound rose by more than three pfennigs to DM2.8657 and broke back through 100 on the trade-weighted index.

Sudhir Junankar, a CBI economist, said: "Although our survey shows export demand still to be weak there is just a hint from the figures that the sharp deterioration seen since June may have levelled off."

The survey also suggests that inflationary pressures in industry remain under control with price expectations at their lowest level for five years. Total orders weakened slightly in September, reflecting a slight moderation in domestic orders and leaving overall demand below normal for the sixth month in succession.

Separately, government figures showed that UK car production fell by a seasonally adjusted 12.8 per cent in the six months ended August. Production for the home market was down 19 per cent while export output was down 7.7 per cent.

Meanwhile broad money supply figures came in slightly below expectations, growing by 11.6 per cent in the year to August and 0.7 per cent for the month. Bank mortgage lending was down on the six-month average at pounds 753m while the increase in total personal credit was its lowest since March.Figures from the Building Societies Association showed net advances in August 20 per cent down on a year ago at pounds 900m.