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Economy in Brief

UK CBI Trends Are Up
by Robert Brusca May 17, 2010

The UK CBI index improved sharply and much more sharply than expected in May. The orders index jumped from a -36 reading to -18, remaining negative but halving its negative reading. The result was completely unexpected. Export orders have improved to the point where their reading is positive for the first time since early 2008. The overall all orders index has just made the largest jump month to month since at least 1989.

The 3-month-ahead volume outlook index improved this month to a net balance reading of +17 from +14 in April. April has seen a big boost to +14 from +5 in March. The outlook volume index stands in the 77th percentile of its range which is a pretty strong standing. The export reading has tied its high since 1996 and has seen no higher reading since August of 1995.

This sort of industrial turnaround could put the BOE on the defensive. UK inflation data have not been good. But if the economy shows signs of strength the inflation data could come to have a more pejorative interpretation.

For now the rise in the industrial in orders index is sharp but only brings it to a reading of -18. Still that is a 58th percentile reading and, by itself, that is not as weak-sounding to me as a minus eighteen scoring sounds. So the BOE has balance for now. The industrial sector seems to be making a push but it is still showing a lot of weakness. Still, the main point stands. The stronger that the industrial sector and the rest of the economy gets, the more that any inflation overshoot will begin to worry the BOE.

UK Industrial volume data CBI Survey
Reported: May
12MO Avg Pcntle Max Min Range
Total Orders -18 -36 -37 -36 -39 -47 58% 13 -61 74
  Export Orders 3 -16 -18 -23 -33 -40 77% 20 -55 75
Stocks:FinGds 10 10 5 12 13 16 36% 31 -2 33
Looking ahead
Output Volume:Nxt 3M 17 14 5 7 4 -3 77% 36 -48 84
Avg Prices 4Nxt 3m 16 17 8 8 -6 -3 69% 37 -30 67
From early 1989
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