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Manufacturing Rose a Third Month in July in Biggest Annual Gain Since 1994
U.K. manufacturing rose for a third month in July and posted the biggest annual gain since 1994 in a sign the economic recovery is persisting.
Output increased 0.3 percent from the previous month, when it also gained 0.3 percent, the Office for National Statistics said today in London. That matched the median forecast of 22 economists in a Bloomberg News survey. On the year, it jumped 4.9 percent.
After the biggest economic expansion in nine years in the second quarter, today’s report suggests strength in the domestic economy and the weakness of the pound are sustaining a pickup in manufacturing. The data may help sharpen a divide at the Bank of England on how much stimulus the economy needs as policy makers start a two-day meeting today.
“Manufacturing will continue to expand and outpace the economy as a whole,” Philip Shaw, chief economist at Investec Securities in London, said in a telephone interview. “Uncertainty on the global economy and the U.K. suggests that there is still a risk the bank will ease policy again.”
The pound was little changed after the release and was at $1.5426 as of 9:43 a.m. in London. The benchmark two-year government bond yield was down 3 basis points at 0.614 percent.
Industrial Production
Out of 13 categories of manufacturing, eight rose, three fell and two were unchanged on the month, the statistics office said. Machinery and equipment, textiles and leather clothing, and paper, printing and publishing led the gains.
Cheltenham, England-based Spirax-Sarco Engineering Plc, the world’s biggest maker of steam-driven pumps, said Aug. 24 first- half profit more than doubled as sales rose in the Americas and the Asia Pacific region.
Overall industrial production, which also includes utilities, mining and quarrying and accounts for 17 percent of the economy, rose 0.3 percent in July from June. Economists predicted a 0.4 percent gain, the median of 25 forecasts in a survey shows. The data will not alter the estimate for second- quarter economic growth, the statistics office said.
Recent surveys on manufacturing have been mixed. The Engineering Employers Federation said Sept. 6 that factory production and exports grew the most since at least 1995 in the third quarter. Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply’s gauge of production slowed to the weakest in nine months in August.
The U.K. economy grew at the fastest pace since 2001 in the second quarter, though the recovery may cool as the government implements the biggest spending squeeze since World War II.
The Bank of England will tomorrow keep its key interest rate at 0.5 percent, according to all 56 economists surveyed by Bloomberg News. The bank will also maintain its bond-purchase plan at 200 billion pounds ($307 billion), a separate survey of 31 economists shows.
Policy maker Andrew Sentance has been defeated at the last three monthly meetings in a push for higher interest rates to stem a pickup in inflation above the government’s 3 percent upper limit. The decision will be announced at noon in London.
To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net
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