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Manufacturing rebound raises hopes of UK avoiding double-dip recession Manufacturing rebound raises hopes of UK avoiding double-dip recession
(40 minutes later)
UK manufacturers enjoyed a rebound in their order books this month, according to a survey that has fanned hopes the UK can escape recession for now.UK manufacturers enjoyed a rebound in their order books this month, according to a survey that has fanned hopes the UK can escape recession for now.
Factories reported an improvement in demand at home and overseas and so expect to keep up "solid" output growth over coming months, said the business group CBI. Factories reported an improvement in demand at home and overseas and so expect to keep up "solid" output growth over coming months, said the CBI business group.
The results chime with other surveys of the sector suggesting that after a tough end to 2011, when the wider economy contracted 0.2%, manufacturers have been benefiting from a new year bounceback in demand and activity.The results chime with other surveys of the sector suggesting that after a tough end to 2011, when the wider economy contracted 0.2%, manufacturers have been benefiting from a new year bounceback in demand and activity.
Economists said it reinforced expectations the UK could post at least some modest growth between January and March and thereby avoid a technical recession, defined as two consecutive quarters of contraction.Economists said it reinforced expectations the UK could post at least some modest growth between January and March and thereby avoid a technical recession, defined as two consecutive quarters of contraction.
"The survey data mean that manufacturing output stands a good chance of returning to growth in the first quarter, having contracted by a worryingly steep 0.9% in the final quarter of last year. This revival of the manufacturing sector will significantly reduce the risk of the UK having slipped back into recession," said Chris Williamson, chief economist at Markit."The survey data mean that manufacturing output stands a good chance of returning to growth in the first quarter, having contracted by a worryingly steep 0.9% in the final quarter of last year. This revival of the manufacturing sector will significantly reduce the risk of the UK having slipped back into recession," said Chris Williamson, chief economist at Markit.
In the CBI's survey of 471 manufacturers, order books appeared to be at their strongest for six months. 21% reported total order books to be above normal, while 23% said they were below. The resulting rounded balance of -3% was up from -16 last month and well above forecasts for -14 in a Reuters poll of economists. In the CBI's survey of 471 manufacturers, order books appeared to be at their strongest for six months. The survey found 21% reported total order books to be above normal, while 23% said they were below. The resulting rounded balance of -3% was up from -16% last month and well above forecasts for -14% in a Reuters poll of economists.
For the second month running, manufacturers said they expected production to rise over the next three months, with a balance of +15% expecting an increase in their volume of output. The most upbeat were consumer and investment goods manufacturers.For the second month running, manufacturers said they expected production to rise over the next three months, with a balance of +15% expecting an increase in their volume of output. The most upbeat were consumer and investment goods manufacturers.
Despite the improvements suggested by surveys over the past two months, official data on economic growth due on Friday are expected to confirm the fourth quarter downturn. The Office for National Statistics is forecast by most economists to confirm its initial estimate that GDP contracted 0.2% in the final three months of 2011. Even those economists who expect the ONS to revise up its forecast on Friday only see it going as high as -0.1%.Despite the improvements suggested by surveys over the past two months, official data on economic growth due on Friday are expected to confirm the fourth quarter downturn. The Office for National Statistics is forecast by most economists to confirm its initial estimate that GDP contracted 0.2% in the final three months of 2011. Even those economists who expect the ONS to revise up its forecast on Friday only see it going as high as -0.1%.
Meanwhile policymakers continue to stress the UK economy is by no means out of the woods and faces plenty of headwinds, not least from the eurozone debt crisis.Meanwhile policymakers continue to stress the UK economy is by no means out of the woods and faces plenty of headwinds, not least from the eurozone debt crisis.
David Miles, of the Bank of England's monetary policy committee, said on Thursday that the UK remained in a "precarious" situation.David Miles, of the Bank of England's monetary policy committee, said on Thursday that the UK remained in a "precarious" situation.
"There hasn't really been much of a recovery from what was one of the deepest recessions in the history of this country," he told broadcaster CNBC."There hasn't really been much of a recovery from what was one of the deepest recessions in the history of this country," he told broadcaster CNBC.
Minutes from the Bank's latest policy meeting released this week showed Miles joined Adam Posen in voting for £75bn in extra electronic cash to be pumped into the economy. They were outvoted by the seven other members and in the event a smaller sum of £50bn in additional quantitative easing (QE) was announced.Minutes from the Bank's latest policy meeting released this week showed Miles joined Adam Posen in voting for £75bn in extra electronic cash to be pumped into the economy. They were outvoted by the seven other members and in the event a smaller sum of £50bn in additional quantitative easing (QE) was announced.
QE, whereby the Bank buys up assets in markets to inject money into the financial system, has been criticised as risking stoking inflation. But Miles said on Thursday that there were many reasons why inflation was probably on a downward path.QE, whereby the Bank buys up assets in markets to inject money into the financial system, has been criticised as risking stoking inflation. But Miles said on Thursday that there were many reasons why inflation was probably on a downward path.
He conceded there was the upside risk of a spike in the price of oil but added: "I think there's plenty of risk on the other side, probably the biggest one is that things play out badly in the eurozone, that some of those risks crystalise, that that hits demand across Europe, the UK's biggest export market."He conceded there was the upside risk of a spike in the price of oil but added: "I think there's plenty of risk on the other side, probably the biggest one is that things play out badly in the eurozone, that some of those risks crystalise, that that hits demand across Europe, the UK's biggest export market."