Manufacturers’ optimism remains strong

MANUFACTURERS are upbeat about the future despite tougher trading conditions, according to a report published today.

The Engineering Employers' Federation (EEF) and Grant Thornton joint survey showed that manufacturing firms are continuing to record healthy growth and that the recent credit crunch has had little impact on the sector so far.

Despite uncertainties surrounding the UK and global economic outlook, 41% of firms said they expected output to increase in the first three months of next year compared with 22% projecting a fall.

Investment intentions also remained high, although not as strong as in the previous quarter, further reflecting confidence over future prospects and the need to keep improve productivity to remain competitive.

Order and output balances were both in positive territory for the ninth consecutive quarter, with the balance on orders +21 – the second highest since 2004 Q3.

All sectors reported positive output balances over the past three months with motor vehicles and electrical equipment reporting the strongest balances for the second quarter running.

Export orders to both EU and non EU countries improved on the last quarter, although domestic orders edged down slightly.

The weaker dollar is also beginning to take its toll with firms with a marked decline in both the electronics and aeropace sector.

Steve Radley, EEF's chief economist, said:

“Despite rising oil prices, a falling dollar and a more uncertain economic outlook, manufacturers recorded another quarter of healthy growth and are looking to the future with a degree of confidence.

“Investment intentions also remain strong, reflecting their continuing commitment to drive up productivity. Though the economic outlook remains unclear, manufacturers' greater resilience should mean that growth continues into 2008.”

He said however that EEF's forecasts for engineering and manufacturing had been revised down since last quarter reflecting the weaker than expected official data for the third quarter rather than a change of view on the sector's prospects.

Engineering is now forecast to expand by 1.3% in 2007 and 1% in 2008. Manufacturing is forecast to expand by 0.8% this year and next.