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
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Steve Bruce and Gus Poyet clash
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths surrounding the enigmatic singer
ebooksA special investigation by Andy McSmith
Life and Style
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
Amazon misled consumers about subscription fees, the ASA has ruled
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn