"Manufacturers have seen a pick-up in activity across the board this quarter, with new orders and production continuing to rise"
- Stephen Gifford, the CBI's director of economics
The number of new orders at British manufacturers improved more than expected this month, with businesses being more optimistic about the economic outlook, cementing expectations the economy is on the path to recovery. The total order book balance in the Confederation of British Industry survey surged to -12 from -18 a month earlier, exceeding analysts' projections of a reading of -15. Nevertheless, the figure remains below 0 level, which indicates increasing order volume, since August 2011, when a gauge reached +1, suggesting there are still plenty room for improvement.
Also Wednesday, the CBI data showed that quarterly business situation balance improved to +7 this month, compared with +5 in April, and hitting the highest since April 2012. Despite a more optimistic assessment of the economy, investment intentions remain muted, as planned spending on buildings over the next 12 months remained unchanged, while planned capital expenditure on machinery and plant fell slightly. Earlier this month figures indicated manufacturing production unexpectedly shrank in May, due to a drop in output of pharmaceuticals and metals, raising doubts about the health of recovery and its sustainability to gain pace in the upcoming months. Moreover, the overall industrial output was flat, meaning the recovery remains fragile and highly vulnerable to any risks.
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