Britain is again manufacturing growth

Britain's manufacturers have racked up another month of steady growth, taking the annual pace of expansion to a near-16 year high, but economists yesterday questioned whether the recovery would last.

The UK government is banking on the industrial sector, which was hit hard during the recession, soaking up jobs as the public sector pays the price of years of over-borrowing.

Official figures yesterday showed manufacturing output had risen 0.3 per cent during July, the same pace as the previous two months, lifting the annual rate to 4.9 per cent - the highest since December 1994.

The wider measure of industrial output - encompassing the mining, quarrying, and energy supply sectors - also rose 0.3 per cent on the month, lifting the annual rate to 1.9 per cent from 1.3 per cent.

The figures, which were in line with expectations, confirm a picture of a strong rebound in manufacturing after heavy losses during the most protracted economic downturn in 60 years.

Firms have been boosted by customers replacing stockpiles used up in the recession, although this temporary effect is expected to reduce. Manufacturers are also braced for weaker demand as global austerity measures kick in.

Howard Archer, chief UK economist at forecasting group IHS Global Insight, noted that recent purchasing managers and CBI surveys for August suggested a slowdown in activity.

He said: "Manufacturers benefited in the first half of 2010 from healthier demand both at home and overseas, improved competitiveness in both domestic and foreign markets stemming from the weak pound, and lean stock levels."

Jonathan Loynes, chief European economist at Capital Economics, said overall industrial production was likely to fall short of the 1.1 per cent gain achieved in the second quarter of 2010. "While July's figures provided some comfort that the industrial recovery remains on track for now, they certainly do not eliminate the danger of a double-dip in the UK economy later this year or in 2011," he added.

Continued uncertainty over the strength of the economic recovery means Bank of England policymakers are expected to keep interest rates on hold when they conclude their latest monthly meeting today.

The monetary policy committee has left rates unchanged at their historic low of 0.5 per cent since March 2009.

Within the manufacturing sector, the main rises were in the machinery and equipment, textiles, and paper, printing and publishing categories.

Business minister Mark Prisk said: "We need to be cautious as manufacturing activity may slow over the coming months but I am most encouraged that the sector continues to be more productive."