Manufacturing boost sends pound to six-year high

Sterling leaps against the dollar

Economics Editor

Manufacturing surged at its fastest pace in seven months in June, bolstering hopes another quarter of strong GDP growth and stoking expectations of a pre-Christmas interest rate hike from the Bank of England.

The Markit/Cips survey snapshot of manufacturing activity shot to 57.5 in June, up from 57 in May and well above the 50 mark that separates growth from contraction. The reading, which was the strongest since November, surprised economists who had anticipated a slight fall in the index.

Immediately after the release of the results, sterling jumped to $1.7136, its highest level since October 2008, as traders bet on a sooner base rate hike from the Bank of England. Against the euro, the pound rose by almost a third of a cent to €1.2513.

Rob Dobson of Markit said that the manufacturing survey rounded off “one of the best quarters for the sector over the past two decades”. The rate of output growth actually eased slightly, but manufacturers reported growth in new work from Europe, Asia and the Middle East. The rate of increase in new export orders hit a five-month high.

“We’ve seen a big focus on new product and service innovation across industry over recent years and this survey provides a bit more evidence that this paying off with companies securing new business off the back of it” said Lee Hopley of EEF, the manufacturers’ organisation.

Employment by manufacturers also rose strongly with small and medium size firms especially stepping up hiring. Output prices increased for the first time since January.

However, the Office for National Statistics also confirmed today that productivity declined by 0.1 per cent in the first quarter of 2014, leaving output per hour 4.3 per centage points below its level six years ago.

In the service sector, output per hour increased by just 0.2 per cent quarter on quarter, although in manufacturing, the performance was better with 1.5 per cent growth.

According to the Office for National Statistics, manufacturing output grew by 1.5 per cent in the first quarter of the year and economists expect it to grow by a similar amount in the second quarter. However, the level of manufacturing output remains 7.5 per cent below its peak in the first quarter of 2008.

“As this news flow is absorbed further, expectations for the first rate hike in Q4 this year should harden” David Tinsley of BNP Paribas said.

The ONS confirmed last week that GDP grew 0.8 per cent in the first quarter. The Bank of England and other forecasters had initially expected growth to moderate in the second half of the year.

However, economists are now increasingly starting to argue that the expansion will accelerate. “Growth may have picked up pace in Q2” said Martin Beck. “We expect a quarterly expansion of around 1 per cent, which would be the highest rate since 2007.”

Tata Steel Port Talbot: 400 jobs at risk

Tata has announced that 400 jobs will be axed at its steel-making plant in Port Talbot. The company’s European chief executive Karl Koehler said the move was influenced by the UK’s high businesses rates and uncompetitive energy costs. The jobs will go at Tata’s strip products business, which makes sheets of steel for tin cans, cars, roofing and fridges. The Welsh government welcomed the fact that the company plans to make the redundancies voluntary. A 45 day consultation process will now begin. Tata has 7,000 staff working at Port Talbot. It axed some 600 jobs in November 2012.

 

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...