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U.K. Manufacturing Index Increased to 16-Year High in November

Dec. 1 (Bloomberg) -- U.K. manufacturing growth unexpectedly accelerated to the fastest pace in 16 years in November as export orders climbed.

A gauge based on a survey of companies by Markit Economics and the Chartered Institute of Purchasing and Supply rose to 58 from 55.4 in October, according to an e-mailed statement today in London. The median forecast of 24 economists in a Bloomberg News survey was for 54.7. A measure above 50 indicates expansion.

A weaker pound is supporting demand for British goods abroad. The strength of manufacturing has exacerbated a divide among Bank of England policy makers on the outlook for economic recovery. They decided last month to leave their bond-purchase plan at 200 billion pounds ($312 billion).

The report “points to ongoing recovery and renewed confidence,” David Noble, chief executive officer at CIPS, said in the statement. “Whilst this is good news for manufacturers at the end of what has been a rollercoaster year, the next few months will be far from an easy ride.”

New export orders rose the fastest in seven months, and employment increased the quickest since the survey began in 1992, the report said.

Bath, England-based Rotork Plc, a maker of industrial valve controls, said Nov. 19 orders were 28 percent higher in the third quarter. The company expects continued weakness in the European water and power markets, while activity will likely increase in Asia.

Official Data

The Office for National Statistics said last month manufacturing production expanded for a fifth month in September to reach the strongest level in almost two years. The pound has dropped about a fifth on a trade-weighted basis since the start of 2007.

Still, the biggest fiscal squeeze since World War II may weigh on the economy. The Treasury’s fiscal watchdog said this week the U.K. faces a “sluggish” recovery and cut its 2011 growth forecast to 2.1 percent from 2.3 percent.

The Bank of England left the key interest rate at a record low of 0.5 percent last month. One member, Andrew Sentance, has been calling for higher interest rates since June to stem inflation, while Adam Posen maintained a push for a second month to boost bond purchases to stoke growth.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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