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Manufacturing output up as demand improves...

First came the news that last year's performance was better than first estimated. Then we heard that the economy grew by 0.3% in the first quarter of this year. And finally came the news we'd all been hoping for - second quarter growth as well. Still only a modest 0.6%, but that's the first time we've seen back-to-back quarterly increases since 2011. Importantly, all the key sectors of the economy grew for the first time since the third quarter of 2010, further boosting hopes that the recovery is well and truly under way.

If you're expecting a 'but', you're not going to find one here. Over the last 12 months in particular, and much longer on an ad hoc basis, we've been focusing on the good news stories that highlight how Britain's key industries have driven through the recession, finding new business, uncovering opportunities, holding their nerve - not just surviving, but growing. As I travel up and down the country, talking with real people in real companies, time again they have failed to recognise the bleak picture painted by the headlines, all the time wondering whether it was just them that were growing while the rest of the UK fell into decline.

So where do we go from here? Well, new orders increased in the manufacturing sector in the three months to July for the first time in a year, while production continued to rise modestly, according to the latest CBI Industrial Trends Survey. And optimism among manufacturers about both the general business situation compared with the previous three months, and export prospects for the year ahead, grew for the second quarter in a row. Domestic orders recorded the strongest growth in a year, and export orders the fastest growth in more than two years. Firms anticipate a further modest rise in orders and output in the coming three months, and expectations for growth in new domestic orders are at their highest since April 2012. Meanwhile, employment in the sector also continued to rise, recording the strongest growth in a year. The CBI says this marks the twelfth consecutive quarter of hiring - a survey record.

There will always be a tendency to look at absolute figures and conclude that the UK's manufacturing sector is a picture of decline. Certainly it's relative contribution to GDP over the years has reduced. But this is due to the massive rise of the services sector and the contribution it has made to GDP. In absolute figures, UK manufacturing output has increased steadily for the last 50 years - it's not spectacular growth, but it is reliable growth nonetheless. And we are finally starting to see some recognition of the importance of the sector from within government circles, with the promised rebalancing of the economy at last starting to take on some meaning, and investment in critical new sectors. We could argue that it's still not enough, but from small acorns mighty oaks do grow. As the CBI itself concludes, it is critical that the government renews its efforts to secure a balanced recovery, using investment and trade as building blocks.

In the meantime, we'll continue to look out for the good news stories that give us all a much needed confidence boost.

Mark Simms, 4 July 2013

 
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