Manufacturers in surprise leap but eurozone picture darkening

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The Independent Online

A surprise March boost for Britain's manufacturers fuelled hopes of averting a double-dip recession yesterday, but the malaise over the eurozone's industrial sector is worse than feared, according to industry surveys.

The latest snapshot of Britain's industrial prowess showed growth among manufacturers picking up to a 10-month high, as well as faster expansion in February than first thought, the latest Markit/Chartered Institute of Purchasing & Supply activity index showed.

But the UK picture contrasted starkly with a worsening downturn in Europe, which is sliding into a renewed recession. France, the second-biggest economy in the single-currency bloc, was worst affected in a miserable month for the eurozone as new orders slumped. The region's economic powerhouse, Germany, also saw a worrying slide in export orders.

UK firms are suffering from one of the biggest spikes in costs for nearly 20 years as crude oil soars above $120 a barrel, but the Cips survey, where a score over 50 signals growth, accelerated to 52.1 during the month. Manufacturers are chasing orders in Africa, Japan and South-east Asia to make up for tougher conditions in Europe, the UK's biggest market.

Despite a warning from the OECD economic think-tank last week over a technical double-dip in the UK, two quarters of contraction, experts said the economy was likely to expand by 0.2 per cent or 0.3 per cent.

Ross Walker, an economist at Royal Bank of Scotland, said: "The manufacturing sector alone is not large enough to drive UK economic recovery, but the survey evidence suggests output in the sector will expand at above-trend rates in Q1."

The upbeat figures will have little bearing on the Bank of England's policy meeting this week, when it is expected to hold interest rates unchanged at 0.5 per cent, but is likely to sharpen debate over a possible extension to its money printing.