Modest Growth In OECD GDP

Private consumption was the main contributor to the modest growth of 0.2% in real GDP in the OECD countries in Q1 of 2014 compared with 0.5% in the previous quarter. Government consumption and investment also added slightly to GDP growth but net exports (-0.1%) and destocking (-0.2%) contributed negatively. Gross fixed capital formation added 0.1% points to real GDP growth.

The OECD G7 countries contributions in percentage points: Japan contributed real GDP growth of 1.6%, Germany and the UK contributed 0.8%, Canada 0.3%, France contributed flat economic growth, Italy made a negative contribution, -0.1% and the US contributed -0.7%.

UK Order Books Looking Better

The manufacturing sector looks to be improving but profits are threatened by rising costs according to the latest Industrial Trends survey from the CBI. The first three months to April show that orders are rising for British made goods overseas but as order books are still recovering from 30 year lows, total order books are still below normal.

The growth in orders is expected to continue over the next few months and production is expected to increase along with it. It is reflected in business confidence which continues to improve. Average unit costs are rising and though domestic prices were stable prices may increase in the next three months. Most firms say they working below capacity.

Firms have continued to de-stock but levels of finished goods have fallen in the quarter and are expected to stabilise in the next as is work in progress as the decline in raw materials slows down. Credit and finance are expected to continue to limit output over the next three months and even constrain exports. A majority of firms have plans to invest in training and retraining and in innovation.

Manufacturing Returning To Growth

The CBI quarterly Industrial Trends survey results were released yesterday. They report that the decline in manufacturing output has slowed in the last three months and the prospects are brighter. Confidence is returning to the sector and growth is expected in the next quarter. The comparative weakness of the pound is also helping British companies to compete in export markets.

The volume of output from manufacturing fell again over the quarter according to a majority of companies responding to the survey though at a much slower rate of decline than in the last quarterly survey in July. A small majority of respondents also expect to see growth in the next quarter. Marginal growth is also expected in the domestic market even though demand has continued to slow. The contraction in demand for exports was less than expected and companies expect export orders to increase over the next three months. More businesses are optimistic about exports for the coming year than they have been since 1995. More and more businesses are also becoming more confident in the general business situation.

Destocking is continuing as stocks of finished goods fell at a record rate for a second time. Levels are more than adequate. Firms are planning to spend more on innovation over the next year. Expenditure on staff and training, plant and machinery is expected to remain unchanged.