Scottish manufacturers enjoyed a rebound in both total new orders and output in the three months to April, and hiked their domestic prices at the strongest pace for 17 years, a survey from the Confederation of British Industry revealed yesterday.
The CBI Scotland report painted a significantly brighter picture of manufacturing north of the border than a UK-wide survey published yesterday by the employers' organisation's London head office.
Overall new orders grew faster in Scotland, with buoyant export demand offsetting a weak domestic market.
Manufacturing output rebounded in Scotland, while the sector UK-wide slipped from expansion to contraction on this measure during the three months to April.
In spite of the improvement in the Scottish manufacturing landscape in the latest three months, CBI Scotland was cautious about the outlook.
It noted that Scottish manufacturers were less hopeful of pushing through price rises for both domestic and export orders in the coming three months, while their input costs were expected to continue to surge on the back of rising oil and commodity prices.
This, CBI Scotland feared, would lead to a resumption of pressure on manufacturers' profit margins.
The CBI Scotland survey showed that, subtracting the percentage reporting a fall from that enjoying a rise, a net 5% of manufacturers experienced an increase in the volume of total new orders in the three months to April. This contrasted with a balance of 2% which reported a fall in the previous three months, and the rise in the latest survey was achieved even though all sub-sectors apart from metals reported a slide in domestic orders.
A net 5% reported a rise in output volumes during the three months to April - the first time the CBI survey has signalled an increase since last July. A balance of 11% predicts a further rise in output in the coming three months.
A balance of 17% of Scottish manufacturers enjoyed a rise in new export order volumes in the three months to April - the first increase reported on this front since last July.
The Scottish food and drink, and mechanical, instrument and electrical engineering sub-sectors saw the strongest export demand. Textiles was the only sub-sector to fail to achieve export order growth.
The net 21% of firms reporting a rise in average domestic prices in the last three months was the highest such balance for 17 years. A balance of 33% of manufacturers reported a rise in export prices - signalling the fastest rate of increase on this front since October 2004.
The CBI's UK-wide survey showed manufacturers' domestic prices rising at their fastest pace since 1995, with an even greater rate of increase expected in the coming three months. It also showed manufacturers were hiking export prices at the fastest rate since the mid-1990s, with a similar rate of increase anticipated in the coming three months.
These upward price pressures would seem likely to unnerve members of the Bank of England's Monetary Policy Committee, who have expressed concern about rising factory-gate prices at a time when benchmark annual UK consumer prices index inflation is above the 2% target at 2.5% and expected to rise further.
Together with figures yesterday from the Office for National Statistics, showing a 2% jump in retail sales volumes during the first quarter, the CBI's UK-wide survey would seem likely to reinforce the MPC's wariness about cutting base rates too quickly.
The MPC has cut rates by a quarter-point in December, February, and this month, taking them to 5%.
Iain McMillan, director of CBI Scotland, highlighted manufacturing outperformance north of the border in the three months to April but also the challenge of sustaining this.
The credit crunch is expected to hit global economic growth hard, with UK-wide expansion expected to slow sharply from about 3% in 2007 to 1.8% this year, and Scotland consequently facing tougher times ahead.
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