Optimistic CBI forecasts turn in manufacturers' fortunes

BUSINESS CONFIDENCE has returned to manufacturing industry for the first time in almost two years, according to a survey published yesterday.

Optimism rose slightly in the latest quarter, its first improvement since October 1997, the Confederation of British Industry said. It said a turnaround in manufacturers' fortunes was in sight, while one City economist raised his forecast for a rise in interest rates next week to one in five. But optimism about export prospects over the year ahead deteriorated a little further in the face of the strong pound. The CBI said that unless sterling fell back on the foreign exchanges, the Bank of England should cut rates by another 0.25 per cent later this year.

Nick Reilly, chairman of the CBI's economic affairs committee and head of Vauxhall Motors, said he believed rates were at the right level, given signs of a domestic recovery. But he added: "If inflation pressures prove as weak as our present forecast, the next move in rates should again be down later this year."

The survey showed 21 per cent of firms were more optimistic about business than four months ago while 16 per cent are less optimistic, giving a positive balance of 5 per cent. This compared with balances of minus 6 per cent in April and minus 40 per cent in January.

But all other indicators, including output and orders, fell - although at a slower rate than the last survey in April. Mr Reilly said: "Things are less gloomy ... but these trends need to be confirmed if we are to look positively at the long-term future."

Economist Adam Cole of HSBC said the sharp rise in optimism pointed to above-trend GDP growth. "The rise in overall business ... is further evidence that rates do not need to fall further," he said.

Kevin Gardiner of Morgan Stanley, in a note written before yesterday's survey, said the probability of a rate rise at the August meeting was between 15 and 20 per cent. "For a money market that has not seriously considered the possibility, this would be traumatic," he said.

It would be the first tightening of monetary policy since June 1988.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor