UK factory production grew at a record pace in the third quarter on surging export demand, the Engineering Employers Federation (EEF) said.
The number of manufacturers saying sales rose in the three months through September exceeded those reporting declines by 33 per cent, compared with 30 per cent in the second quarter, the EEF and accountancy firm BDO Stoy Hayward said in a quarterly survey released today in London. That’s the highest since the report began in 1995. A gauge of exports also rose to a record.
While Britain’s economy grew at the fastest pace since 2001 in the second quarter, recent data suggest growth may be moderating. Manufacturing, services and construction growth all weakened in August, reports last week showed, adding to the dilemma Bank of England officials face as they mull whether to expand monetary stimulus or withdraw it.
“The recovery does seem to be under way and there appears to be a bit of momentum behind it,” EEF Chief Economist Lee Hopley said in an interview. “There’s a pretty positive outlook for the next three months. Orders are coming in, but that’s not to say there aren’t still question marks over 2011.”
The UK’s benchmark stock index, the FTSE 100, rose 0.4 per cent and was at 5448.21 as of 8.56 am in London. The pound gained 0.1 per cent against the dollar and was trading at $1.5453.
Manufacturing forecast
Factory output, which accounts for about 13 per cent of the economy, will grow 3.7 per cent this year, the EEF said, higher than the 3.5 per cent projection made in June. The group also raised its estimate for 2010 economic growth to 1.5 per cent from an earlier prediction of 1.1 per cent. Manufacturing growth will ease to 3.2 per cent next year, it forecast.
A gauge of export orders rose 7 points to 30 in the third quarter, the EEF said. The pound has fallen about 21 per cent on a trade-weighted basis since the start of 2007, making exports more competitive.
Survey responses showed sales in the Middle East and east Asia were “particularly strong,” and markets in the European Union have been “better than expected” over the past two quarters, Hopley said.
Bank of England Monetary Policy Committee member Charles Bean said on August 28 that Britain’s economy “remains fragile” and “further policy action may yet be necessary to keep the recovery on track”. While officials left the benchmark interest rate on hold last month, Andrew Sentance voted for an increase for a third month.
