Exports outlook buoyant

UK manufacturers reported a weakening in domestic demand but a further strengthening in export demand in June. Overall, demand was less buoyant with only 5 per cent of industrialists indicating that their total order books were above normal, compared with a balance of 10 per cent in May.

The survey results from the Confederation of British Industry will provide further ammunition for the Chancellor - whoever that might be after the leadership election - to keep interest rates on hold.

In the ding-dong last month between Kenneth Clarke and Eddie George, Governor of the Bank of England, the Chancellor pointed to the stagnation in manufacturing output since last September. By contrast, the Governor drew attention to the fact that "orders (especially for exports) remained very strong" in the CBI survey.

According to the CBI, manufacturers have become more pessimistic about the outlook for production. In May, there was a positive balance of 31 per cent expecting output to grow in the next four months. In June, this had fallen to 21 per cent.

Some restocking took place in the month, with 11 per cent of manufacturers reporting stocks adequate, compared with 6 per cent in May. A positive balance of 18 per cent expected prices to increase over the next four months.

Sudhir Junankar, the CBI's associate director, said the manufacturing recovery seemed to be "slowing slightly". He said the continuing buoyancy of export demand should help to support the more moderate output growth over the coming months.