Manufacturing defies gloomy forecasts to hit four-month high

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The Independent Online

Output at British factories hit a four-month high last month, echoing confident forecasts of an economic rebound by the Bank of England but standing in stark contrast to official figures.

Output at British factories hit a four-month high last month, echoing confident forecasts of an economic rebound by the Bank of England but standing in stark contrast to official figures.

Activity in the manufacturing sector accelerated in November, defying forecasts of a slowdown to hit its strongest level since July, the Chartered Institute of Purchasing and Supply (Cips) said.

The figures came a day after Mervyn King, the Bank's Governor, said that the economy had emerged from a "soft patch" over the autumn.

The strength of the survey added to speculation that the Bank may raise interest rates in the New Year to stifle inflationary pressures in the pipeline. Factory output prices are running at a nine-year high. It also added to doubts over estimates from the Office for National Statistics, which show a 1 per cent fall in manufacturing over the three months to September.

John Butler, UK economist at HSBC, said: "This [Cips] survey is quite simply more consistent with a boom rather than the bust indicated by the official figures. "The gloom over the summer months was overdone and hence the move in short sterling to discount any chance of any near-term rate rises looks too aggressive."

The Cips survey showed that orders from domestic clients picked up, especially in the consumer goods sector, while growth in export orders accelerated at their fastest pace since July.

Input prices rose at their quickest pace since April 1995, forcing manufacturers to impose the largest price rise for at least five years. Chris Williamson, the chief economist at NTC, the analysts firm that compiled the survey, said: "We've seen inflation building in the pipeline."

A similar survey for the eurozone showed that manufacturing growth suffered its sharpest monthly fall since the 11 September attacks on the US three years ago as the strength of the euro took its toll on exports.

Across the Atlantic, the outlook for US manufacturing improved in November as factories hired more workers in response to a jump in new orders.

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