Eurozone woes hit UK export hopes while US showing signs of recovery

Factory bosses are set to cut production in the New Year after figures yesterday showed the eurozone crisis has plunged exports to a two‑year low – contrasting sharply with better economic data from across the Atlantic. The CBI revealed in its latest industrial trends survey that, of the 434 UK manufacturers responding, 41 per cent reported total order books to be below normal in December, with 18 per cent saying above normal.

The resulting survey balance of minus 23 per cent is the lowest since October 2010. A negative balance of minus 32 per cent on UK exports is the lowest since January 2010.

Just under one in three manufacturers now expects to reduce output over the next three months, the CBI said. That compares to just under a quarter who believe that production will rise.

CBI chief economic adviser Ian McCafferty said: “The weaker export performance no doubt reflects ongoing instability in the euro area, our biggest export market, and its knock-on impact on prospects for the real economy.”

It came as more upbeat US figures showed the number of American jobless dropped to a three-and-a-half-year low last week. Initial claims for state unemployment benefit fell 19,000 to 366,000, the US labour department said, the lowest since May 2008 and confounding economists’ expectations for a rise to 390,000.

In separate reports, two US Federal Reserve regional surveys, for New York and Philadelphia, also showed stronger-than-expected growth.

“The data is in line with a modestly improving overall economy here in the United States,” Peter Kenny, managing director at Knight Capital in New Jersey, said.

City economists said yesterday that UK manufacturers faced both domestic and overseas headwinds. The eurozone, where the future of the embattled single currency is still in the balance, accounts for 48 per cent of UK exports.

Howard Archer, chief economist at IHS Global Insight, said: “The latest manufacturing survey evidence and hard data have been hugely disappointing overall, and it looks highly likely that industrial production will contract appreciably in the fourth quarter.”

Archer said: “Manufacturing has been battered by a combination of domestic and external headwinds.

“Domestic demand has been impacted by squeezed consumer purchasing power and reduced public spending.

“The sector is also absolutely not insulated from what is going on in the eurozone. Across the Channel it is not just a case of depressed demand for our exports, but also the massive uncertainty going forward.”

Car production accelerated last month, the Society of Motor Manufacturers and Traders (SMMT) said.

A total of 136,111 cars were made in the UK in November - 8.5 per cent up on the same month last year.

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