May 25, 2006 | posted by Michael Baxter in Uncategorized |

Those Anglo Saxons. They spend, they
borrow and they get into debt. It’s not just the individuals either; both the
US and the UK as a whole suffer from massive balance of trade deficits, as
the two nations import more than they export, and run up debts to the rest
of the world to fund it. That means consumers are leading our economic
growth and, unless spending is matched by corresponding increases in
production, sooner or later it will end in tears.

Perhaps the twin pillars of discontent, amongst economists interested in
the UK, are manufacturing and investment. Actually, that’s not true,
economists seem discontented about everything - it’s just that gripes about
manufacturing and investment seem to top the list. At last, we have some
good news about both.
According to the CBI: “For the first time since February 1996 as many
firms said export orders were above normal as below, driven by renewed
demand for capital goods such as industrial engines and aerospace
equipment.”
Each month the CBI asks its members a series of yes no questions. For
example: “Are order books up on last year? Are exports up on last year?”
The balance forms the CBI industrial trends indexes.
The main index - the order book index - is still negative. It has been
below zero now for 22 months. But, it is getting better. The CBI said: ” 22
per cent of manufacturers reported total orders were above normal
compared to 34 per cent who said they were below normal, producing a
balance of minus 12. Although negative, this maintains the slowly improving
trend seen since the turn of the year and is comparable to April’s balance (-
11), which was the strongest since February 2005 (-10).”
CBI Chief Economic Adviser Ian McCafferty said: “The outlook for UK
manufacturing is more encouraging than it has been for some time on the
back of the stronger performance of eurozone economies and continued
growth in the US. However, while the signs are encouraging, the pick-up in
domestic demand of earlier in the year has not been sustained and there is
still little sign of an increasing appetite for British-made consumer goods.
Until this happens the recovery will remain fragile.”
Unfortunately, the good news about investment was not quite so clear
cut. According to the Office of National Statistics, investment in the first
quarter of 2006 is provisionally estimated to be 2.8 per cent higher than the
same period last year, and 1.7 per cent higher than the previous quarter.
But commentators still managed to put a negative gloss on the figures.
Capital Economics said: “However, business investment was always likely to
rebound in Q1 after the weakness seen in Q4, when it fell by 0.9 per cent.
And it is possible that the other 40 per cent of all investment in the economy
(government and house building) was much weaker.”

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