For both manufacturing and services, the key domestic balances are stronger in Q1 than in Q4, but overall the improvements are fairly modest and are still below pre-recession levels seen in 2007.
Export balances are strong, with service export orders and deliveries almost at the all time highs seen in 1994 (orders up 8 points to +26%, deliveries up 9 points to +33%).
It is disappointing that most employment balances weakened across both sectors (the manufacturing employment balance fell 4 points to +11%, and in services the employment balance fell 3 points to +6%).
Business confidence has increased further, with all balances much stronger than their average levels in the midst of the recession in 2008 – 2009.(Manufacturing turnover confidence rose 3 points to +44%, and by 2 points in services to +40%. Profitability confidence increased by 3 points in manufacturing to +33%, the highest it’s been since Q4 2007, but was unchanged for services at +22%).
Investment intentions rose slightly overall in the first quarter. The balance of manufacturing firms looking to increase investment in plant and machinery rose three points to reach +14% – the best level since Q1 2012. In services, this balance increased by 4 points to reach +9% – the best level since Q4 2007.
Intentions to raise prices are weaker in Q1, particularly for manufacturers where balances dropped 19 points to +17%, which reflects reduced pressures from raw material costs. The balance of service firms expecting to raise prices fell 2 points to +19%.
The Q1 cashflow balances, though still relatively weak, are now in positive territory for both sectors. Cashflow for manufacturing firms edged down 1 point to +2%, while improving in the service sector by 7 points to +6%.
Overall, the Q1 results support our view that the economy will record positive but subdued growth in 2013