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UK Economy
Domestic demand lifts UK manufacturers
From the Financial Times of Mon, 15 Dec 2014 13:28:16 GMT

Order books at Britain’s manufacturers have hit a four-month high in an encouraging sign that domestic demand continues to boost the sector despite persistent weakness in the main export markets.

In the CBI’s last survey of the year, a quarter of companies reported that total order books were above normal, with 56 per cent reporting they were normal and 19 per cent below normal, giving a positive balance of 5 per cent.

This is the highest reading since the summer and will ease concern that the unexpected 0.7 per cent drop in output between September and October recorded earlier this month was signalling a wider slowdown.

Rain Newton-Smith, director of economics at the CBI, said December’s survey showed the sector was ending the year on an “upbeat note, having lost a little momentum earlier in the year”.

While the reading for export order books still remains deep in negative territory, there was a slight improvement with the overall balance of companies reporting falling orders dropping from minus 17 to minus 13 per cent.

Howard Archer, chief UK economist at IHS Global Insight, said the survey was “largely encouraging” and raised hopes that the sector was “getting over its recent soft patch”.

He added that the recent marked fall in oil prices was easing pressure on manufacturers’ margins, and “sustained very low oil prices could also provide a much-needed boost to growth prospects in key UK export markets, including the eurozone”.

Paul Hollingsworth, UK economist at consultancy Capital Economics, said that while the survey has been more optimistic than official data for a number of months, there were a number of reasons to remain optimistic about the sector’s prospects, pointing to signs of a recovery in wages, strong business confidence and loosening credit constraints.

“Robust growth in domestic demand should ensure that the recovery in manufacturing rebuilds some steam in 2015,” he said.

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