Exports boost UK factory orders

The UK factory orders rose in February as demand for exports from the country continued to improve. Manufacturers’ total order book balance in Britain rose to -8 in February from -16 in January, the Confederation of British Industry (CBI) survey showed on Thursday.

Markets had expected the order book balance to rise to -9 in February. “February’s CBI Industrial Trends Survey suggests that the recovery in the manufacturing sector is continuing to gain pace,” said Samuel Tombs, an economist with Capital Economics.

Also, firms’ expectations on the manufacturing output in the coming months rose sharply, with the corresponding balance increasing to +23 in February from +17 in January.

“The output expectations balance rose from 17 to 23, a level consistent with quarterly growth in manufacturing output of around 3 percent,” said Tombs.

The balance showing the exports order growth rose to +11 in February from 0 in January, the highest level since June 1995.

“The outlook for UK manufacturing output growth is very encouraging. Firms predict further acceleration in production growth over the next quarter, supported particularly by a strengthening in export order books,” said Ian McCafferty, chief economic adviser, CBI.

Further, a balance of 32 percent of firms predicts they will have to raise prices over the coming quarter, fuelling inflation worries in the country.

“However, there is still worrying evidence of strong inflationary pressures in the pipeline, with manufacturers once again expecting to raise prices sharply in the coming quarter. Firms’ predictions of price rises are now very close to their last peak in the summer of 2008,” McCafferty said.

The annual consumer price index (CPI) in the UK rose to 4 percent in January compared with 3.7 percent in December 2010, the Office for National Statistics said on Tuesday.

Also, the CPI in January advanced 0.1 percent month-on-month, recording its first ever increase between a December and January.

The UK inflation rate in January remained above the Bank of England’s (BoE) target of 2 percent for 14 consecutive months.

The rise in inflation increases pressure on BoE to raise the interest rates to tame the accelerating inflation.

Inflation is forecast to remain stubbornly high during this year as a result of increase in VAT and pressure from rising energy and commodity prices, CBI said. Consumer price index (CPI) inflation will exceed the BoE target of 2 percent in 2011 for a second year running, it said.