LONDON (MNI) – UK SMEs saw a solid rebound in sales and orders in
Q1 after these had fallen to their lowest levels since 2009 in Q4 last
year, according to the latest Quarterly Economic Survey from the British
Chamber of Commerce.

But the BCC warned that these numbers show that growth is still not
strong enough, noting that many manufacturing and service sector
balances are only back to levels seen in Q2 2011, although well off the
depths plumbed in Q4.

The manufacturing home orders balance rose to 6%, its strongest
since Q2 2011 when it stood at 9%. This compares to the -13% seen in Q4.
This sector’s home sales balance rose to 12 from flat in Q4.

Manufacturing export sales rose to 24% in Q1 from 12 in Q4.

While services saw some pick up, gains were less dramatic than in
manufacturing and Q1 balances are still relatively weak by historical
standards. Home sales rose to a balance of 10 from the 2 seen in Q4
while orders rose to 7 from -9 in Q4.

The BCC said that fears of a domestic recession are easing among
SMEs while threats of Eurozone disintegration have also receded.

Almost all key national balances strengthened in Q1, and are much
stronger than during the worst phase of the recent recession.

The employment outlook for the next quarter also shows a striking
reversal of sentiment. The manufacturing balance is sharply higher at
15%, compared to -8% reported at the end of last year. The service
sector outlook has surged to 11%, 9 points higher than the Q4 report.

Manufacturers’ profitability confidence rose 12 points to 21%, its
highest level since Q2 2011 when it stood at 22%. Service profitability
confidence also rose 12 points to 14%, the largest since Q4 2010 when
the recorded balance was 17%.

This survey follows a stronger-than-expected CIPS PMI report for
the manufacturing sector in March. But while the PMIs overall have
portrayed a moderately robust picture of Q1, other data – such as
industrial production, retail sales and consumer confidence – have been
much less buoyant.

Further PMIs for the services sector and for construction will be
released later this week and industrial production is due out on
Thursday. These releases should help to provide UK policymakers with a
clearer assessment of the pace and magnitude of the recovery.

The Bank of England Monetary Policy Committee is not expected to
take any policy action when it meets on Wednesday-Thursday this week
and, barring further deterioration in the data most analysts don’t
expect a move in May either.

–Sanjukta Moorthy is a reporter at Need to Know News; London
Newsroom: tel: +4420 7862 7485, Sanjukta.moorthy@ntkn.com

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