UK manufacturing growth stronger than expected

 

UK manufacturing strengthened for a third consecutive month in February, boosting hopes that the economy is re-balancing.

Official statistics showed output grew by 1%, up from 0.3% in January and 0.4% last December. Output was 3.8% up on the same month a year earlier and is at its highest level in two years.

“The latest industrial production figures provide reassurance that the economic recovery has remained strong and broad-based,” said Samuel Tombs of Capital Economics.

The wider index of industrial production, which includes the energy sector, was up 0.9% in February, having flat-lined the previous month after bad weather hampered North Sea oil and gas output. Last month’s figures were considerably stronger than analysts had expected and helped to send sterling up half a cent against the dollar in morning trading to $1.67.

The encouraging news came as the International Monetary Fund today gave Britain the biggest growth upgrade of any advanced economy over the next two years in its latest round of forecasts. The IMF estimated the UK would grow by 2.9% in 2014, up from its 2.5% estimate in January. Next year it has pencilled in a 2.5% lift in GDP, up from its previous estimate of 2.2%.

The Office for National Statistics said the largest contribution to manufacturing growth in February came from pharmaceuticals, transport equipment, food and beverages.

Seven out of 13 sectors showed growth. A British Chambers of Commerce survey also today showed manufacturers’ balances, including investment plans, hit new highs in the first quarter.

“All indicators are lining up for a strong first-quarter growth rate, highlighting that industry remains  a vital cog in the UK’s continuing recovery,” said Lee Hopley of the manufacturers’ organisation, EEF.

However, manufacturing still languishes 8.2% below its pre-crisis peak in 2008, the ONS said. In 2013, manufacturing, which accounts for about 15% of the economy, was a drag on growth, knocking 0.1 of a percentage point off GDP.

The dominant contribution to the 1.7% expansion of GDP came from the services sector. In his 2011 Budget, Chancellor George Osborne said he wanted to see Britain “carried aloft by a march of the makers”.

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