Boom Britain: Triple boost for UK economy fuel recovery hopes

Optimistic signs after growth across manufacturing, construction and services

There was further cheer over the UK recovery as official figures showed factories sprung back into life in June with the sharpest rise in manufacturing output for nearly a year.

Manufacturing output rose 1.9 per cent on a month earlier, reversing falls in April and May, while overall production was up 1.1 per cent month-on-month.

All parts of manufacturing - spanning car to food-manufacturers - grew monthly output for the first time in more than 20 years, according to figures from the Office for National Statistics.

Economists said it was the "most convincing sign yet" that all sectors of the economy are recovering, although they warned factories will struggle to maintain this pace of growth.

The official data follows recent upbeat industry surveys for July which have signalled growth across manufacturing, construction and services.

The 1.9% month-on-month rise in manufacturing was the steepest since July last year and was well ahead of economists' expectations of a 1 per cent increase.

Lee Hopley, chief economist at manufacturers' organisation the EEF, said the figures "give further weight to the view that manufacturing activity will continue to gain pace, becoming a more important contributor to growth in the year ahead".

Industrial production in June was up 1.2 per cent compared with June 2012 - its fastest year-on-year growth for around two and a half years.

Transport equipment makers gave the biggest boost to factory output, with a 5.3 per cent month-on-month increase. There was also a 3.1 per cent rise in the manufacture of electronic and optical products. All 13 manufacturing sub-sectors increased output from May - the first time since 1992.

But warmer temperatures saw people turn off the heating, knocking output from gas and electricity firms by 5.8% month on month.

Recent figures showed the economy expanded by 0.6 per cent overall in the second quarter, with production rising by the same percentage.

Samuel Tombs, economist at Capital Economics, said: "June's surge in industrial production was the most convincing sign yet that the sector is sharing in the recovery already underway in the rest of the economy.

"While industry will struggle to replicate June's strong growth, a gradual recovery in production now appears to be taking place."

Howard Archer, chief UK and European economist at IHS Global Insight, said it was another "very good news day for the UK economy", lifting hopes that the recovery is "broadening as well as deepening".

Stronger-than-expected output from Britain's factories will ease pressure on the Bank of England to pump more money into the economy.

New Bank governor Mark Carney gives his first inflation report tomorrow and is expected to reveal plans for "forward guidance" on economic stimulus, including pinning future rate rises to economic milestones, such as unemployment figures.

ING Bank economist James Knightley said the data highlights the importance of tomorrow's announcement as the Bank "seeks to prevent market interest rates and sterling rising too high too quickly, thereby choking off the recovery story".

PA

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