Export orders in Britain’s buoyant manufacturing sector are growing at their fastest rate in nearly three years, the latest snapshot of the industry’s health showed yesterday.
UK firms reported rising demand not only from traditional export destinations like North America and Europe, but from Asia, Brazil and Scandinavia, according to the Chartered Institute of Purchasing & Supply (Cips). Exports are growing at their fastest rate since February 2011, its survey showed.
The news comes as Nick Clegg, the Deputy Prime Minister, leads a trade delegation to Mexico and Columbia to push the case for British exporters in South America.
David Noble, chief executive of Cips, said: “Whilst domestic demand continues to climb, it is the expansion overseas that promises continued growth. The elusive export market has long been heralded as the key to unlock UK economic growth and [here] it appears to be coming to fruition.”
The export surge is under way despite a strengthening pound, and business spending on goods like plant, machinery and IT software is at its highest in two decades, survey compiler Markit said. Samuel Tombs of Capital Economics said: “While the stronger pound may begin to hinder a recovery in exports, the easing of credit constraints and the squeeze on households’ real pay should support a further revival in domestic demand for investment and consumer goods”.
Manufacturers are also adding staff at the fastest rate in more than two years, increasing the chances of the Bank hitting its 7 per cent unemployment threshold for raising interest rates “imminently”.
The Bank meets on Thursday to set its policy. Although economists expect no change in rates, the decision will be watched closely in case it makes a statement about its forward guidance plans.
Cips’ overall activity index, where a score over 50 signals growth, eased from 57.2 in December to 56.7 – the lowest for three months but well above the 51.3 long-term average of the last 20 years. Analysts said the survey suggested that the wettest January in 100 years hadn’t hit the recovery. Simon Wells, HSBC’s chief UK economist, said: “The modest decline in output suggests there hasn’t been a big impact from [January’s] flooding and wet weather. This is good news for Q1 GDP.”
In the eurozone, manufacturers are growing more quickly than at any time since May 2011; even in Greece the sector is expanding, for the first time since August 2009. The figures ease the pressure on the European Central Bank to ward off a deflationary threat with a further interest rate cut this week.
German activity rose to 56.5 in January from 56.3 in December. France was still in negative territory at 49.3, but up from 48.8. “Encouragingly, France is also showing signs of stabilising, enjoying a welcome return to export growth,” said Chris Williamson of Markit. He also noted a pick-up in Spain and Italy. Overall, the figures suggest the now 18-nation eurozone economy should grow 0.4-0.5 per cent in the first quarter, he added.
Howard Archer of IHS Global Insight said it “adds to the evidence that eurozone economic activity has regained momentum” after the third-quarter slowdown.
“We estimate… growth improved to 0.3 per cent quarter-on-quarter in the fourth quarter of 2013 and the January manufacturing PMI suggests that the eurozone is building on this improvement,” Mr Archer said.