Rate cut less likely as factory optimism hits five year high
Factory output is down, but confidence is higher
Optimism among manufacturers is at a six-year high as the Brexit headwinds dissipate and despite falling output.
The CBI reported a huge swing from October last year when 44% felt negative about the outlook to 23% being more positive.
It is the largest quarterly turnaround since 1958 and may reduce the likelihood of the Bank of England reducing interest rates next week. The hike took analysts by surprise: most had pencilled it a balance of -20%.
Following strong jobs figures from the Office for National Statistics earlier this week, all eyes will now be on Friday’s Purchasing Managers’ Index (PMI) data.
The CBI’s findings contrast with the latest quarterly survey from the Scottish Chambers of Commerce in partnership with the Fraser of Allander Institute which shows confidence levels remaining weak, with manufacturing, retail and tourism all negative on the outlook.
It reports business confidence on a downward trajectory over a series of quarters, and significantly below the five-year average.
However, analysts will treat the the SCC survey with some caution as it was undertaken in November and December when Britain was in the grip of the political stalemate over Brexit.