Car production rise boosts manufacturing output

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The Independent Online

Recovering car production pushed the manufacturing sector to its strongest growth in more than three years during July, official figures showed today.

Output grew by 0.9 per cent over the month - well ahead of forecasts and the best performance since May 2006 - the Office for National Statistics (ONS) said.

Car manufacturing grew by 10.4 per cent during the month as experts seized on the latest signs that the ailing UK economy is emerging from recession.

Howard Archer, of IHS Global Insight, said the figures were a "really nice positive surprise".

Car manufacturing has been boosted by initiatives such as the scrappage scheme as well as factories restarting production after shutdowns at the height of the recession.

The second successive month of growth overall was helped by a strong performance from the chemicals, rubber and plastics industries - although the electrical, printing and publishing sectors were stuck in the doldrums.

June's figures were also revised higher but manufacturers have a long way to go to make up the ground lost by the downturn as output is still 10.1% lower than in July last year.

Industrial production overall - including output from mining, quarrying and the utilities - was also up 0.5% month on month.

Manufacturers have been helped by the huge stimulus to the economy given by record low interest rates of 0.5% as well as efforts to boost the money supply through quantitative easing.

Business groups urged the Bank of England to keep up the assistance at the latest meeting of the Monetary Policy Committee this week.

British Chambers of Commerce chief economist David Kern said: "The early stages of any upturn will be driven by a turnaround in stock levels, so it is important to maintain and reinforce the stimulus provided by quantitative easing.

"Recent falls in bank lending to non-financial firms are worrying and it may be necessary for the MPC to consider additional measures."

Disappointing retail sales figures showing an end to the summer revival in August also added to the caution among experts.

ING Bank economist James Knightley added: "We look for UK GDP to expand 0.3% in the third quarter and perhaps improve further in the fourth, although the weakness in the BRC retail sales survey suggests that those looking for an early end to policy stimulus will be disappointed."