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Growth remains steady, but manufacturing faces challenges

New figures from the CBI show that there is encouraging news for the economy. Growth in the UK continues to remain steady, however, the CBI predict that it might level off slightly during the final quarter of the year.

Despite the positive news of steady growth, the CBI did sound a note of caution and stated that: “Expectations for growth are not as strong as earlier in the year”.

Commenting on the latest growth indicator figures, Rain Newton Smith, Director of Economics for the CBI, said:

“This shows a continuing story of solid growth.

“Previously pent-up demand delivered a strong boost to growth during the first half of the year but this effect may be fading. The UK is continuing to expand on a healthy trajectory, returning now to steadier and more sustainable growth rates.  

“Domestic political uncertainty is an issue for businesses but the global backdrop is a greater concern. The Eurozone is weak, with a real risk of deflation, growth in emerging markets has slowed and geo-political tensions in the Middle East and Ukraine are the biggest threats to confidence.”

Manufacturing Industry

One of the strongest performers was the service sector, but news wasn’t all good for the manufacturing industry. Economic indicators from the CBI showed manufacturing growth was still weak, but it has performed better in the last quarter with 15 of 18 of the manufacturing sectors reporting an increase in output. However, the reduced demand for exports meant that the growth in the manufacturing sector was stalling when compared with figures from earlier this year.

Mixed outlook for manufacturing

421 manufacturers were surveyed by the CBI and most indicated they expect output volumes to remain low in the near future. The majority of sectors stated export orders remained low, with the mechanical engineering sector suffering the most.

Manufacturers also expect their output prices to increase over the next quarter due to price inflation.

In addition, there  were mixed views on the possibility of growth in the next three months; 28% manufacturers think orders will increase while 18% predict they will fall.

Moreover, there was a mixed picture for output in the last quarter; 36% of those surveyed said that output had increased in the last quarter, and 22% stated it had fallen.

The CBI stated that manufacturers were facing many challenges in the export markets such as slow growth in the Eurozone and greater competition from countries like China.

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