--CBI: Net -10% UK firms Jan total orders above normal; Dec -2%
--CBI: Net -14% UK firms Jan export orders above normal; Dec -21%
--CBI: Net 14% UK firms see output up in next 4 mos; Dec 12%
--CBI: Net 4% UK firms see higher prices in next 4 mos; Dec -4%
--CBI says net -3% UK firms more optimistic in Jan vs -9% in Oct
--CBI says net 7% of UK exporters more optimistic in Jan: Oct -6%
--CBI reports first rise in UK exporter optimism since Jan 2000
--CBI: UK mfg domestic prices seen rising for first time in 3 yrs
By BridgeNews
London--Jan. 24--The picture for the U.K.'s wheezing manufacturing sector appears to be brightening even as the U.S. economy deteriorates and worries about the rest of the world intensify, according to the latest Confederation of British Industry trends survey. Although orders remain weak and confidence is still fragile, quarterly output expectations are at their highest since 1997 and export optimism has now turned positive for the first time in a year.
* * * The CBI said a net negative balance of 3% of manufacturing firms were more optimistic about the general business situation than they had been four months ago, compared with a net negative balance of 9% in October. But a net positive balance of 7% of exporters said they were more optimistic, compared with a net negative balance of 6% in October.
The balance of firms reporting higher output expectations rose to 14% in January from 12% in December and only 1% in November. The CBI said it was the highest balance in a quarterly survey since 1997.
The overall tone of the survey suggests that while manufacturers are not exactly enjoying a wonderful business environment the situation is improving.
It is unclear how many of the returns, which were received between Dec. 14 and Jan. 10, had been completed after the Federal Reserve had signaled its concern about the U.S. economy with a sudden interest rate cut.
Nick Reilly, chairman of the CBI's Economic Affairs Committee, said: "The survey contains mixed news for manufacturers. Both domestic and export orders are expected to rise, but investment intentions and employment prospects all remain depressingly weak."
The CBI said it still thinks the Bank of England's Monetary Policy Committee should cut interest rates in February and that a modest reduction would not jeopardize its inflation target.
A net negative balance of 10% of firms said their total order book was above normal in January, compared with a net negative balance of 2% in December and a negative 17% in October.
Export order books also remain below normal but the rate of deterioration has slowed and they were the least negative in January for more than a year. A net negative balance of 14% of exporters said their order books were above normal, compared with a net negative balance of 21% in December and 31% in November.
The CBI said exporters appeared to have got a lift from the weakening in sterling and continued growth in Europe. The latest survey also showed the first rise in manufacturers' domestic price expectations for three years. A net positive balance of 4% of firms said they planned to increase prices over the next 4 months, compared with a negative balance of 4% in December and a negative 13% in November. The increase comes despite a fall the oil price and other commodity prices in recent months.
Investment plans were still weak, reflecting the squeeze on margins that manufacturers have been suffering in recent years. A net negative balance of 22% of firms said they planned to increase capital expenditure on buildings, compared with a negative balance of 29% in the previous quarterly survey in October. Planned expenditure on plant and machinery was also weak. Employment expectations also deteriorated over the past quarter. A net negative balance of 12% of firms said they planned to take on more staff over the next four months, compared with a negative balance of 8% in October.
Philip Shaw, economist at Investec, said the survey would not alter the growing support on the Bank of England's Monetary Policy Committee for an interest rate cut in the coming months.
"The MPC was aware of the improving manufacturing background when it met earlier this month even though it hadn't seen the full quarterly results. The counter argument in favor of cutting rates is simply that the international environment is very fragile.
"The improved export confidence could easily be reversed. So I think that despite the relative strength of the quarterly survey we are on course for a rate cut next month," he said.
The latest survey did however suggest that manufacturing would avoid sliding back into recession, which had looked a distinct possibility back in the summer. End Copyright 2001 Bridge Information Systems Inc. All rights reserved