CBI figures reveal fragility of Britain’s economic recovery

The figures come a day before a preliminary estimate of gross domestic product in the first three months of this year, expected to show the economy expanded by only 0.5 per cent after a 0.5 per cent decline at the end of 2010.

The CBI said its Industrial Trends manufacturing orders balance fell to -11 in April – its lowest since January – down from a three-year high of +5 set last month.

Economists had expected a smaller decline to +3, and June gilt futures briefly edged up to a session high after the data.

“While still decent compared to long-term norms, the April CBI industrial survey adds to recent mounting signs that the hitherto buoyant manufacturing sector may be gradually coming off the boil,” said Howard Archer, an economist at IHS Global Insight, the market intelligence firm.

The survey also adds to the Bank of England’s dilemma about how to curb inflation while the economy was still shaky.

In a sign that price pressures are continuing to build in the economy, both the monthly and quarterly price expectations balances in the CBI survey rose to +36 in April – their highest since January 1990.

Manufacturing has been the bright spot in Britain’s recovery, but other surveys also show that the sector may be running out of steam.

Nonetheless, the CBI said April’s reading was consistent with a continued recovery in the sector, noting its quarterly survey, published at the same time, was strong.

That showed the order book balance for the past three months rose to +20 from +18 in the January survey, its highest level since April 1995.