CBI says economic tide could at last be on turn

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MANUFACTURING companies are more confident about business prospects than at any time since the recession began, the authoritative quarterly survey from the Confederation of British Industry showed yesterday.

Sir David Lees, chairman of the CBI's economic affairs committee, said the survey's results mean 'the economic tide may at last be on the turn'. But he said the CBI could not firmly predict that the recession was over until hopes of higher output became reality.

After 11 successive quarters of falling output, that caution was reinforced by the continued contrast between relatively optimistic expectations in past surveys and subsequent disappointing reality.

The CBI also said manufacturing employment was likely to shrink by a further 60,000 jobs in the first quarter, although that represents a slower rate of shedding than in the past four months. However, the survey suggested manufacturing orders and exports are likely to expand in the next four months.

Meanwhile, official figures showed that broad money supply (notes, coin and bank accounts) grew at its slowest rate since 1964, suggesting companies and consumers are still repaying the debts of the 1980s and dampening hopes of a consumer-led upturn.

The glimmer of life in the housing market last month was reflected yesterday in a slight increase in the number of net mortgage commitments recorded by building societies in December.

In the latest quarterly survey of Industrial Trends, the employers' organisation said uncertainty over the economic situation left intact the case for a further cut in interest rates. But in the currency markets, the CBI survey came as a setback to hopes of lower rates, and the pound gained 1.18 pfennigs to DM2.4492.

The CBI also warned that UK companies are more worried about recession in overseas markets than at any time in the past nine years, despite sustained optimism over export prospects and hopes of a sharp rise in export orders, a key ingredient of any recovery.

Although export prospects to the US have improved, conditions in European markets have deteriorated, Sir David said.

Of the 1,173 companies surveyed, some 26 per cent were more optimistic about the general business situation while 15 per cent were pessimistic.

The excess of optimists over pessimists, of 11 per cent, compared with a 23 per cent majority of pessimists in the previous quarterly survey, in October - is the sharpest swing in confidence since April 1988.

Money growth's record low, page 20