UK’s recovery hopes get a boost from soaring exports

Britain's manufacturers finally showed signs of delivering on hopes of an export-led recovery today, after overseas sales soared at the fastest pace for five months in October.

The rise by the Chartered Institute of Purchasing and Supply's latest index was the quickest since May and reversed an export decline in September.

The buoyant performance defied expectations of slowing activity across the sector overall, which picked up the pace of growth for the first time in seven months.

The purchasing managers' index, where a score over 50 signals expansion, rose from September's 10-month low of 53.5 to 54.9 in October.
The export surge will help ease fears over the impact of £81 billion in public spending cuts on the wider economy in the months ahead.

CIPS chief executive David Noble said: "Exports are the engine of growth in manufacturing at the moment."

The upbeat survey is also likely to deter the Bank of England from upping efforts to boost the money supply beyond £200 billion when rate-setters gather for their latest policy meeting this week, coming after the UK economy's forecast-busting 0.8% growth between July and September.

Manufacturers raised output by 1% over the quarter, adding 0.1 percentage points to overall growth.

Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club, said the survey put the "final nail in the coffin" to expectations of more quantitative easing by the Bank this week.

He said: "Though the recent GDP data might exaggerate the underlying strength of the economy, it is clear the recovery still has reasonable momentum, and at this stage there is no compelling case for the MPC to implement any further stimulus."

According to CIPS, firms reported increased exports to mainland Europe, Latin America, the Middle East and Africa as overseas clients took advantage of the strong pound.

Suppliers of transport, electrical and mechanical engineering goods did best with timber and paper the only sector to report a decline, it added.

Exports of parts used in other equipment and capital goods such as plant and machinery were "especially robust", Markit's senior economist Rob Dobson said.

Manufacturers have now grown output for the 17th month in a row and are taking on new staff at the quickest rate since June, CIPS added.