The survey, published by EEF, the manufacturers’ organisation and RSM Robson Rhodes, also showed that nationally, for the first time in six years companies planned to increase investment and have not reported job cuts.
Commenting on the results, EEF Chief Economist, Stephen Radley said:
"Manufacturers are now delivering the long awaited upturn and are looking to expand further in the second half of this year. However, the rising the price of oil and commodities will make it harder to rebuild margins and could also eat into growth."
Key findings
- output and orders continue to rise strongly
- first quarter without job losses for six years
- investment intentions become positive
- price increases reflecting increasing costs
- margins remain under pressure
- companies remain optimistic about next three months
- healthy growth forecast
All sectors reported growth in the last three months, with a global recovery in investment spending a major factor in the expansion of basic metals and mechanical engineering. However, the positive balance for motor vehicles dropped sharply from its first quarter level due to a decline in UK based orders.
The regional picture pointed to a more even performance across the UK with more buoyant conditions across all regions. Electronics continues to drive growth in the South and Scotland whilst the North West and North East have benefited from the upturn in mechanical equipment. The Midlands continued to improve despite the weaker performance of motor vehicles.
There are also some signs of rising prices, though this is mainly due to companies passing on the rising cost of steel to their customers. The negative balances on both domestic and export margins suggest that cost pressures continue to impact on companies’ profits.
Of particular note was the prospect of companies increasing investment, with an end to the quarter on quarter cuts made since the end of 1998. In addition, this is the first quarter since the beginning of 1998 that companies have not reported job cuts. However, the picture varies by sector and region with the regional analysis indicating that the largest number of jobs was created in the South of England.
Manufacturing is forecast to grow by 0.9% this year and 2.7% in 2005, engineering by 1.8% and 4.4% respectively. However, growth for this year may well turn out to be stronger than this if the official figures move closer in line with survey data.
Bob Hale, Chairman of RSM Robson Rhodes’ National Manufacturing Group, said:
"These encouraging figures are partly due to the increasing demand from the emerging markets, in particular China. Companies should also benefit from the planned increase in investment, which will further boost the sector. The only shadow on the horizon is the potential problem we would face if there was an oil shortage which would clearly hinder the recovery"