CBI survey shows rise in orders and output

THE order books of British manufacturers reached their highest level for five years in May, and companies expect factory output to rise sharply in the next four months, according to the Confederation of British Industry, writes Peter Torday.

Export orders have also improved, reaching their best levels since mid-1990 when the manufacturing recession began. And the CBI's latest monthly Industrial Trends survey also showed that inflationary pressures are still relatively dormant.

Based on survey results over the past few months, the CBI upgraded slightly its predictions for economic growth, projecting an expansion of 2.4 per cent in 1994, edging up to 2.5 per cent the following year.

But base rates will probably start rising early next year as the underlying rate of inflation climbs to 2.9 per cent by the end of the year, from 2.3 per cent at present.

Higher commodity prices, a slight increase in average earnings and higher indirect taxes will push the underlying rate up to 3.3 per cent by the fourth quarter of 1995, the CBI said.

Consumer spending will remain the mainstay of the expansion, but export growth and investment spending are likely to become more significant.

Consumers are expected to offset the impact of higher taxes and the slow growth in take-home pay by drawing on savings.

The survey shows that 22 per cent of companies rated their order books above normal against 25 per cent who thought they were below.