BlogLatest NewsUK manufacturing activity growing at fastest rate 'for a generation'

UK manufacturing activity growing at fastest rate 'for a generation'

Figures from the manufacturing sector for June suggest the recovery is broadening out and bedding-in, pushing sterling to six-year high against the dollar.

Britain’s manufacturing sector enjoyed its strongest growth "for a generation" in the second quarter, economists said on Tuesday, after a respected survey showed activity continued to surge last month.

The pound climbed close to a six-year high against the dollar at $1.7149 after data from survey compilers Markit showed the sector expanded for a 16th consecutive month amid swollen order books and increased production.

Strong demand for orders both at home and abroad also meant manufacturers took on staff at their quickest pace since March 2011.

Economists said the data showed Britain's recovery was gaining traction and broadening out. “UK manufacturing continued to flourish in June, rounding off one of the best quarters for the sector over the past two decades," said Rob Dobson, senior economist at survey compilers Markit.

"With levels of production surging higher, and order books swollen by a further upswing in demand from both domestic and overseas clients, job creation accelerated to its highest for over three years."

Martin Beck, senior economic adviser to the EY ITEM Club, described the expansion in the manufacturing sector over the past three months as the "strongest output in a generation".

"Growth in manufacturing output will almost certainly improve on Q1’s 1.5pc growth rate," he said. "There were plenty of other positive signs in the figures too. The overall expansion in the sector appears to be broad-based, while rising new orders and optimism amongst firms should help to sustain the current renaissance in business investment and encourage firms to take on more staff."

The Markit/CIPS Purchasing Managers’ Index rose from 57.0 in May to 57.5 – its second highest point in 40 months and well above the 50 level that divides growth from contraction.

Companies reported more new work from Europe, Asia and the Middle East and an acceleration in new export orders.

Mike Rigby, head of manufacturing at Barclays, said: “The recovery in the manufacturing sector appears to be gathering real pace and these figures are mirrored by our clients as we see them ramping up production to meet new business from both domestic and overseas markets.

“Stronger economic conditions and the appeal of ‘Brand Britain’ are encouraging exporters to venture more into new and existing markets, which is key if growth is to be sustainable.”

But David Noble, group CEO at the Chartered Institute of Purchasing and Supply, warned that lengthening delivery times showed suppliers were “grappling with the pace of growth and the demand it has brought”, in an indication that some businesses are having to deal with capacity constraints.

Meanwhile, official data on Tuesday showed UK productivity fell in the first quarter. Output per worker edged down 0.1pc in the first three months of the year compared with the previous quarter, according to the Office for National Statistics (ONS), though on an annual basis, output rose by 0.6pc. Productivity remains 4.1pc lower than its previous peak in the second quarter of 2007.

Source - Telegraph

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