British manufacturing activity slowed at the start of 2011 after record performances in the previous three quarters, but firms are optimistic about the future despite having to raise their prices, a survey said. The Engineering Employers' Federation said a balance of 25 percent of companies reported a rise in output in the first quarter, down from 33 percent in the previous one.
The positive first quarter reading was above the EEF's forecast and contributed to the strongest four-quarter period since the survey began in 1995. However, rising energy and raw material costs pushed the balance of companies expecting to hike prices for domestic and export markets in the next quarter to record highs.
That may alarm Bank of England policymakers who are trying to bring inflation down from 4 percent, double its target, without damaging the fragile economic recovery. The EEF trade body warned that persistently high commodity prices, Middle East tensions and worries about the strength of the economic recovery may cloud the picture in the year ahead.
"Manufacturers have picked up this year where they left off in 2010, with output growing and little sign that the export-led recovery is about to dry up in the near-term," said EEF Chief Economist Lee Hopley. "The outlook for the rest of 2011 still remains uncertain as a number of economic headwinds persist and new geopolitical tensions add another layer of uncertainty to economic forecasts." Despite the unpredictable outlook, companies' expectations for new orders hit a record high, with a balance of 33 percent predicting stronger order books in the next quarter.
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