Chamber’s Economic Survey points to continued UK growth

Suffolk Chamber members recently fed into the British Chambers of Commerce’s (BCC’s) national Economic Survey, which is carried out each quarter and provides a region-by-region comparison of economic activity. 

The BCC’s Economic Survey is the largest and most representative of its kind in the UK, and the recent results have suggest that the country’s economy experienced further growth in the second quarter of 2010, building on the improvement in the first three months of the year.

Key indicators on business conditions, such as employment expectations, investment plans, export orders, and domestic sales – in both the manufacturing and service sectors – made gains in the second quarter of the year.

Commenting on what the results mean for Suffolk, Dr Peter Funnell, President of Suffolk Chamber said:

““The survey shows the manufacturing sector displaying a mixed picture. While domestic activity and exports are positive and growing, this has not yet translated into firms expanding, or expecting to expand their workforce.

“Consistent with the national picture, the rising price of raw materials is putting pressure on prices, which is, in part at least, a product of the weaker exchange rate.

“Most key indicators are pointing in the direction of expansion, which is positive news. The fundamentals that are still weak in the service sector, however, cannot be ignored. Cashflow – a huge problem throughout the turbulence of the last two years – is still a source of concern, and investment intentions are still low.

“Overall the results suggest a continuing but sluggish recovery from recession. This recognition should provide further impetus to the Coalition Government to implement business friendly measures and actively support business priorities such as skills development and sensitive investment in business-critical infrastructures.”

The highlights from the Q2 QES include:

• Manufacturing home sales surged by 29 points in Q2, to +30%; a level not seen since the last quarter of 2007. The service sector’s domestic sales rose 6 points, to +12%.
• Manufacturing export sales increased by 11 points, to +31%; its highest level since Q3 2006 and an indication that exporters are benefiting from a more competitive exchange rate. The service sector’s export balances recorded modest increases and they remain weak by historical standards.
• Employment in manufacturing saw a big improvement in Q2, rising 35 points to +19%. Manufacturing employment expectations also increased by 16 points, to +14%. Employment in services edged up by just 1 point, to +4%, while employment expectations rose 3 points, to +11%.
• One of the most worrying aspects of this quarter’s results is the pressure manufacturing firms are facing to increase prices, driven by the cost of raw materials. The balance of manufacturers reporting pressure to raise their prices surged 22 points in Q2, to +30%, which is the highest figure this survey has seen since Q3 2008.
• Confidence improved among manufacturers in Q2. However, the service sector’s confidence measures weakened – a disappointing setback at this early stage of the recovery.
• Manufacturing’s cash flow improved by 10 points, to +1%. Services cash flow improved 6 points, but remains negative at -3%.