Hopes rising of recovery after UK output surge

By SCOTT REID
Published on 08/09/2012 00:00

OUTPUT from Britain’s factories and oil fields has been growing at its fastest pace in 25 years, raising the chances that the economy is emerging from a double-dip recession.

However, the official data for July from the Office for National Statistics also showed that cost pressures for companies were on the rise again, adding to inflation concerns and providing a potential fresh headache for the Bank of England.

UK manufacturing output jumped 3.2 per cent after a drop of 2.9 per cent a month earlier, when the Queen’s Jubilee holiday hit output. This was the strongest rise since July 2002 and above even the most optimistic of forecasts.

The wider reading of industrial output, which includes energy production and mining, jumped by 2.9 per cent, marking the biggest rise since February 1987.

A survey earlier this week suggested that the good news for manufacturing had continued into August, with the latest purchasing managers’ index rising to a four-month high. The reading was only slightly below the 50 mark that separates contraction from expansion.

Howard Archer, chief UK economist at forecasting group IHS Global Insight, said: “July’s sharp rebound in industrial production is excellent news that provides a significant lift to third-quarter GDP growth prospects.”

The British Chambers of Commerce said manufacturers still faced “real challenges”.