Surge in industry confidence

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The Independent Online

Optimism among Britain's manufacturers has unexpectedly taken a turn for the better in March, according to the monthly survey by the Confederation of British Industry. The gain in confidence came despite a drop in orders after four months of improvement.

The survey showed that export demand remained weak, but not as weak as last year thanks to economic recovery in Europe and the buoyancy of the US market.

Sudhir Junankar, the CBI's associate director of economic analysis, said sterling's strength was still handicapping exporters, but added: "Manufacturers have become more confident about increasing production over the coming months."

Optimism about future output was at its highest level since September, with 32 per cent of manufacturers expecting output to rise over the next four months compared with just 15 per cent expecting declines. But the survey found 35 per cent reported total orders were below normal in March while 19 per cent said they were above normal.

Mr Junankar said the prices respondents expected to charge for their goods had weakened. "The downward pressure on prices and margins seems to be increasing once again," he said. In the past the CBI survey has been an advance indicator of trends in official producer price figures.

Economists were surprised by manufacturers' upbeat expectations. "The outlook for the manufacturing sector has deteriorated since the end of last year," said James Carrick at ABN Amro.

A separate survey yesterday suggested economic growth would slow down in the second half. Research firm NTC said its indicator of future activity fell in February for the fourth month.