The manufacturing industry picked up pace in February, and output is expected to grow faster still in the next three months.
The CBI Industrial Trends Survey of 522 manufacturers found that total order books have strengthened on already robust levels, climbing to a six month high.
Rain Newton-Smith, CBI economics director, said: “Our manufacturers have more of a spring in their step this month, regaining some of the momentum lost towards the end of last year.
“The drop in oil prices is good news for the manufacturing sector in the UK, bringing with them lower operating costs, but North Sea producers are clearly suffering.”
Export orders also rallied this month, to a level well above average, regaining some of the ground lost towards the end of last year. However, they still lag behind more robust domestic orders.
Rain added: “Export orders picked up significantly, to a level not seen for six months, but uncertainty over prospects in the Eurozone will continue to weigh on export demand. So, it’s imperative we continue to help manufacturers sell their products and services into high-growth markets around the globe.”
Growth in output volumes rose in February, reaching their highest level for seven months, and 16 of the 18 sectors anticipate growth in the coming quarter.
Joshua Raymond, chief market strategist at CityIndex, commented: “UK factory orders hit their highest levels since August last year in February at +10, which is more than expected and provides another strong sign for the UK recovery. Another good sign is the fact that output expectations, a measure of business confidence, also hit its highest levels since September last year, at 2015.
“So this is essentially positive on both underlying order book levels, and expectations. We did not see a huge reaction in the market on the back of this announcement. The pound strengthened a tad as this re-affirms the hawkish monetary path the Bank of England is now on. However, it is unlikely to dramatically change the markets current thinking that the first UK rate hike will likely come in Q1 2016.”
Firms are expecting a modest rise in selling prices over the next three months, although expectations for price inflation remain moderate on the whole.