Manufacturing boost for economy

Hopes that the economy has emerged from the double-dip recession were boosted today as a survey showed an improvement in the outlook for manufacturers.

A balance of 7% of manufacturers surveyed by the CBI this month expect to increase their volume of output in the next three months, compared to a flat balance in August.

Fewer manufacturers reported order books below normal levels in September, the CBI said, while export orders showed some recovery as well.

The economy shrank by 0.5% between April and June, marking the third consecutive quarter of declining output and the longest double-dip recession since the 1950s.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The September survey lifts hopes that the manufacturing sector saw robust overall expansion in the third quarter, thereby making a significant contribution to GDP growth."

Anna Leach, CBI head of economic analysis, said: "Domestic and overseas demand have improved in this survey following last month's falls, providing a foundation for somewhat better output growth expectations.

"Manufacturers believe that there will be a modest rise in output over the coming months, driven largely by the chemicals and food and drink sectors.

"But uncertainty is expected to build through the autumn ... meaning that conditions are likely to remain difficult for UK manufacturers."

There were further troubling signs for the inflation outlook in the CBI survey as firms in the consumer goods sector expected to raise prices in the coming quarter.

However, most other firms' expectations for factory gate prices remained subdued.

Samuel Tombs, UK economist at Capital Economics, warned that the improved survey did not necessarily signal a sustained recovery for manufacturers.

He said: "We are reluctant to conclude at this early stage that the worst is now over for the manufacturing sector."

PA