UK manufacturing expanded twice as much as economists forecast in October, a sign the recovery is maintaining momentum into the final quarter of the year.
Output rose 0.6 per cent from September, the most in seven months, the Office for National Statistics said today in London. The median forecast of 23 economists in a Bloomberg News survey was for an increase of 0.3 per cent. Overall industrial output fell 0.2 per cent as utilities and mines cut production.
Prime Minister David Cameron is relying on exports and investment to keep the economy growing as the government prepares to step up the pace of spending cuts and increase value-added tax on sales to tackle the record budget deficit.
“They’re a good set of figures,” David Tinsley, an economist at National Australia Bank in London and a former Bank of England official, said in a telephone interview. “The underlying momentum is pretty sound. Things are looking all right for fourth-quarter GDP.”
The pound lost gains made after the report and was trading at $1.5783 as of 11.18 am in London, up 0.4 per cent on the day.
The Bank of England is this week forecast to keep its bond- purchase plan at £200 billion ($313 billion). Policy makers remained split last month on whether the economy faces a greater risk from slowing growth or faster inflation.
Factory output grew in October for the sixth month in succession. Out of 13 categories, eight rose, led by transport equipment. Two fell, led by food, drink and tobacco. Output of capital goods rose 1.8 per cent, with engineering and allied industries posting a 2 per cent increase. Production of consumer durables declined 1.3 per cent.
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Recent reports suggest the recovery is persisting after the economy posted its fastest growth spurt in a decade in the second and third quarters.
A Chartered Institute of Purchasing and Supply index published last week showed manufacturing growth unexpectedly accelerated to the fastest pace in 16 years in November, with the weaker pound boosting demand for British goods abroad.
Bath, western England-based Rotork Plc, a maker of industrial valve controls, said on November 19 that orders were 28 per cent higher in the third quarter and the full-year profit outlook is in line with previous guidance.
Officials still caution that the budget squeeze, which is forecast to lead to the loss of 330,000 public-sector jobs, may hurt economic growth.
The Treasury’s fiscal watchdog said on November 29 that the British economy faces a “sluggish” medium-term outlook and cut its 2011 growth forecast to 2.1 per cent from 2.3 per cent. Manufacturing rose 5.8 per cent in October from a year earlier.