Car industry gives manufacturing a boost

Signs of life in the beleaguered car industry helped the manufacturing sector to its best month since the beginning of last year during June, official figures showed today.

Manufacturing output rose 0.4% over the month - the biggest increase since January 2008, the Office for National Statistics (ONS) said.

A 13.5% jump in car manufacturing over the month - the best performance since January 2007 - was a significant factor behind the rise, the ONS

The car industry has been crippled by a drought in consumer finance for car loans and slumping demand in recession - prompting aid from several governments such as scrappage incentives to replace old cars.

During the three months to June, car manufacturing output rose 10.1%, although this is still almost 43% below the same period last year.

As well as an overall 4.1% rise in transport equipment industries in June, electrical and optical product manufacturers saw a 2.5% rise, offsetting a 3.6% monthly decline in the chemicals sector.

Overall industrial production - including mining and quarrying and output from utilities - was up 0.5% over the month, although it declined 0.6% between April and June compared with the first quarter of the year.

Economists said the figures showed manufacturing was past the worst after more than a year of contraction.

The data will also be weighed by rate-setters on the Monetary Policy Committee who will decide tomorrow whether to give further aid to the economy through an increase in its quantitative easing (QE) programme, which stands at £125 billion so far.

Vicky Redwood at Capital Economics said the figures were "encouraging stuff", but warned: "The recovery is still in its early stages, and given the MPC's caution about these 'green shoots', we still think that more QE will be announced tomorrow."