Manufacturing Beats Forecast Predictions



Manufacturing is strong for the first half of the year but is expected to slow with the lack of government contracts in the months ahead.

Manufacturing is strong for the first half of the year but is expected to slow with the lack of government contracts in the months ahead.

Manufacturing has shown great strength during H1.  It has smashed the predicted numbers and has posted the strongest growth in a six month period since 1994.

The first quarter dip in growth as a result of stimulus funds being withdrawn, never materialized.  Restocking and demand, both foreign and domestic, have more than compensated for any dip.

Taking the whole economy into consideration, net trade has yet to help contribute towards growth.  Manufactured exports are on the rise.  The real numbers for growth on exports for H1 2010 has exceeded forecasts.  These numbers straight from the latest EEF/BDO Manufacturing Outlook.

Even though these forecasts are being exceeded, output still remains 10 per cent below its pre-recession peak.

The UK is on the brink of political uncertainty.  This, combined with fiscal consolidation will not alleviate the fact that the recovery will still be bumpy.  GDP will grow by just 0.5 per cent in the next 2 quarters, says EEF with research group Oxford Economics.

Since government capital budgets are being reduced, manufacturers supplying to the public sector will receive less business from government procurement contracts.  This confirmed by the Emergency Budget.

“Those who are reliant on government spending have become less so and have looked to diversifying, including into international markets, and we have seen pretty strong growth in emerging markets for example,” says Lee Hopley, chief economist at EEF.

Domestic output is tied directly to the success or failure of Europe, the US and China.  There is an outside chance that the US and Europe may slip back into recession.  China’s growth is slowing as it manages an inflated economy.

“Overall the balance of risks haven’t changed significantly (since January forecasts), but they’re somewhat different challenges for manufacturers looking ahead to the next 12 months,” says EEF’s Hopley.

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