Double-dip recession fears ease

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The Independent Online


Double-dip recession fears eased further today after figures showed a surprise surge in manufacturing activity last month as output growth accelerated for the first time since March.





The Chartered Institute of Purchasing and Supply's (CIPS) activity index, where a reading over 50 indicates growth, rose to 54.9 in October - up from September's 10-month low of 53.5 and confounding expectations for a fall.



The stronger-than-forecast result comes after the output reading rose to 56.4 in the first increase for seven months.



Economists said the survey reinforced hopes the UK recovery was on a firm footing, coming after last week's gross domestic product (GDP) figures showed a robust 0.8% rise in the third quarter.



It is also seen adding to pressure on the Bank of England to hold off from further money-boosting measures at its rates meeting being held this week.



James Knightley, economist at ING Bank, said: "This report confirms that the improving picture painted by last week's good GDP data has continued into the final quarter of the year.



"It will also provide further ammunition for the Government to argue that the economy is strong enough to withstand the fiscal austerity measures they are implementing."



October's CIPS report showed a rise in output thanks to increased order intake and faster export growth, with exports rising at the fastest rate in five months.



The strongest output growth was in the intermediate goods sector - products used by manufacturers in production.



There was also good news on employment in the sector, with a sharp pick-up in jobs last month.



Rob Dobson, senior economist at Markit said: "An improvement in the UK manufacturing purchasing managers' index for the first time since May's 15-year high will provide reassurance that manufacturing remained a driver of UK economic growth at the start of the final quarter.



"Looking ahead, business confidence, private investment spending and exports will be important to sustaining the recovery as growth derived from the public sector and consumers is hit by austerity measures and rising job insecurity."



But there are still concerns over the impact on industry from the Government's spending cuts over the year ahead.



A recent CBI survey on the manufacturing sector flagged up signs of a slowdown, with the worst reading for factory orders for six months in October.



Howard Archer, chief economist at IHS Global Insight, said: "The concern remains that manufacturing activity will be pressurised increasingly over the coming months by stock rebuilding winding down, tighter fiscal policy weighing down on domestic demand and slower global growth hitting foreign demand for UK products."

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