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Manufacturing output rises at quickest pace since 2014

Manufacturing output has risen at its quickest pace for more than two years as the Brexit-hit pound boosts overseas demand for British goods, a report has said.

The Confederation of British Industry's (CBI) industrial trends survey said output volumes saw their fastest acceleration since July 2014, with a balance of plus 23% in March.

The survey, which gathers responses from 423 companies, said a strong demand in the pharmaceutical and mechanical engineering sectors also pushed export order books to highs not seen since December 2013.

It found that export order books had reached a balance of plus 10% for March, with 24% of companies reporting above normal levels and 14% seeing a fall in demand.

Total order books showed a balance of plus 8% over the period, the CBI said.

Sterling's slump against many major currencies since the EU referendum result has helped export demand by making UK goods cheaper for overseas buyers.

Anna Leach, CBI head of economic intelligence, said the data showed that March had been a "strong month" for manufacturers, with robust production growth and rising overseas demand.

"The past fall in the pound seems finally to be helping lift demand for UK manufactured exports, which rose at one of the fastest paces in this survey's history.

"And manufacturers are positive about the quarter ahead, expecting output to grow at the fastest rate since February 1995."

Despite providing a helping hand to exports, the pound's collapse has proved a double-edged sword for manufacturers as the cost of importing materials has soared.

The CBI said average output prices were on course to rise over the next quarter, as manufacturers pass down rising import costs to consumers.

It said 35% of firms expect to see output prices rise and 7% believe they will fall, leaving a balance of plus 29%.

Ms Leach said the " flipside" to the pound's fall is that "cost pressures are widespread, and manufacturers expect factory-gate prices to continue to rise strongly over the next three months".

She added: "And this will also put pressure on prices generally."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the data revealed a brighter picture for exports.

"The CBI's survey indicates that exports are picking up rapidly, softening the blow to manufacturers from slowing domestic demand.

"Producers are benefiting both from the improvement in global trade flows and the weaker pound. UK manufacturers, however, are heavily reliant on imported inputs.

"As a result, net trade likely will not offset fully the slowdown in domestic consumption this year."

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