Televisions, planes and automobiles boost output

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The Independent Online

A record month for car and plane factories combined with a surge in orders for flat screen televisions before the World Cup to make March the best month for manufacturers in almost a year.

Factory output jumped 0.7 per cent between February and March, the strongest rise since April last year, the Office for National Statistics said.

The rise, combined with a good month for the North Sea oil industry and electricity suppliers, meant the overall production sector grew 0.8 per cent in the first quarter of the year.

This was higher than the 0.7 per cent the ONS assumed when it produced its initial estimate of first-quarter GDP, which could now be revised up from 0.6 per cent to 0.7 per cent. This would put growth above trend and provide fresh ammunition for those on the Bank of England who want to raise rates to quell inflationary pressures.

The upbeat figures came a day after the Bank of England signalled the next move in interest rates would be up. Analysts in the City rushed to bring forward their forecasts for the timing of the next move.

Dominic Bryant, an economist at BNP Paribas bank, said it was considering changing its forecast for an August rise. "The strength of recent data and the Bank's inflation forecasts highlight the risk of an earlier move," he said.

The National Institute of Economic and Social Research said the Bank should raise rates at the "next available opportunity" - when its Monetary Policy Committee meets on 7 and 8 June.

But business groups warned a rate rise would kill the manufacturing recovery. David Kern, chief economic adviser to the British Chambers of Commerce, said the sector still faced serious threats, with margins being squeezed by higher energy and raw materials costs. "The new manufacturing figures should not be used as an excuse for supporting the current unjustified clamour for higher rates," he said. "It is critically important to nurture the fragile improvement."

The driving force behind the improvement in manufacturing was a 2.8 per cent rise in output from aerospace factories and 3.2 per cent rise for cars. The transport industry as a whole is running at a record level.

The figures follow a narrowing of the UK's goods trade deficit on Wednesday and will boost hopes of a rebalancing in the economy away from domestic consumption and borrowing and towards industry, investment and exports.