The Q4 2010 results are mixed. They show continued manufacturing strength, with the sector’s export balances rising to multi-year highs. But the service sector’s performance was unsatisfactory. The manufacturing balances improved for the domestic market, for exports, for cashflow, for investment in plant and machinery, and for profitability confidence.

The manufacturing balances for employment and turnover confidence, though marginally lower, remain strong. But in the service sector, many key balances are too weak. It is disturbing that the service balances for home orders and for investment in plant and machinery moved deeper into negative territory, while the service balances for employment and cashflow are at zero. The improvement in the service balances for exports and confidence is welcome, but the sector’s overall record is inadequate. Increased intentions to raise prices, particularly in manufacturing, will worry the MPC. But weak demand, the relentless squeeze on disposable incomes, and lower capacity utilisation will make it impossible to secure big price increases.