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Manufacturing orders rising sharply

Factory orders are growing at their fastest rate for nearly two decades, figures showed today, as Bank of England policymakers said the UK's economic recovery was "building momentum".

The CBI's Industrial Trends survey found that in the three months to April, growth in total order books and domestic orders was the strongest since 1995.

Exports also grew strongly while investment intentions for the year ahead were "particularly robust", the figures showed, and jobs rose at the strongest rate since October 2011.

Business optimism among manufacturers saw its sharpest improvement since 1973, the survey of 405 firms found.

The figures showed 38% of businesses reported an increase in total orders and 17% a decrease, giving a balance of plus 21%. The balance for new domestic orders was plus 17%. These were both the highest since April 1995.

Figures for the latest month on its own showed a slight negative balance in orders.

Katja Hall, the CBI's chief policy director, said: "Confidence is rapidly rising among British manufacturers, with a real sense of business optimism.

"Our industrial base is seizing a bigger role in the UK's economic recovery, with output, orders and hiring all on the up.

"There are still bumps in the road ahead, with only a tepid recovery likely in the eurozone, the pound creeping higher and a rapidly-evolving situation in Ukraine.

"However, expectations for growth in the coming three months are positive and manufacturers plan to significantly ramp up investment in the year ahead."

Meanwhile, minutes from the latest meeting of the Bank of England's rate-setting Monetary Policy Committee (MPC) painted a brighter picture of the UK's economic improvement, which has so far relied on rising domestic demand.

They said: "The domestic recovery was building momentum, with some signs of a modest rebalancing toward investment."

The Bank has revised up its estimate of growth for the first three months of this year to 1% though it expects this to be a little weaker in the second quarter.

But there was disagreement on the committee over the impact of self-employment on the sharp improvement in jobs figures.

The minutes said there was a "range of views" about whether many self-employed people were under-employed and looking for work as employees.

That would imply a greater degree of "slack" in the economy than the headline jobs figures would suggest.

This "slack" is a key measure taken into account by policy-makers when deciding on the path of interest rates, with a greater degree of slack meaning the economy still needs more help from low rates to get closer to full capacity.

The minutes showed that the latest policy decision announced earlier this month to keep the Bank rate at its historic low of 0.5% was again supported by all nine members of the monetary policy committee (MPC). Analysts expect to see the first rate rise next spring.

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