Friday 20 May 2016 12:09 pm

Industrial orders: Maybe things aren’t so bad in the manufacturing sector

Data around the manufacturing sector has been pretty disappointing in recent months, with the likes of the ONS suggesting the sector has actually fallen into recession.

But figures out this morning from CBI suggested the industrial sector – of which manufacturing makes up a large part – is actually doing pretty well.

The CBI's Industrial Trends Survey showed total orders balance rose to minus eight per cent in May, up from minus 11 per cent in April and minus 14 per cent in March. That's a five-month high.

The balance of manufacturers suggesting output will increase in the next three months rose to 20 per cent, up from 17 per cent in April. Some two per cent even went as far as saying they expect domestic prices to rise in the next three months – although that was down slightly from four per cent in April.

Domestic orders seemed to be the most encouraging area – export orders fell back slightly from an eight-month high of minus 13 per cent in April, to minus 14 per cent in May.

"This is a significantly better survey than had been expected, providing some very welcome and much needed improved news on the manufacturing sector," said Howard Archer, chief European and UK economist at IHS Economics.

"Following on from news that retail sales rose 1.3 per cent month-on-month in April, this raises hopes that GDP growth could hold up better in the second quarter than has been looking likely.

"We are currently expecting UK GDP growth to be limited to just 0.2 per cent quarter-on-quarter in the second quarter, but the April retail sales and May CBI industrial trends survey suggest this could turn out to be too pessimistic."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, added that the survey "suggests that the downturn in the manufacturing sector is relenting." Which, considering figures in March showed the sector had slumped to its lowest pace since 2013, should come as a relief.