- Report indicates the economy is defying global headwinds
- Bank of England will publish new forecasts on Thursday
U.K. manufacturing growth unexpectedly accelerated to the fastest in 16 months in October as new orders surged.
In a monthly report published in London Monday, Markit Economics said factories bucked this year’s downward trend and started the fourth quarter of the year on a stronger footing. The manufacturing index rose to 55.5 from a revised 51.8 in September, beating economists’ forecast for a reading of 51.3.
The report indicates the economy is defying headwinds from emerging markets and maintaining some momentum. It may also reinforce the view of some Bank of England officials, who say that the U.K. economy is strong enough to warrant a rate increase soon. The pound jumped after the report and was up 0.3 percent at $1.5474 as of 11:10 a.m. in London.
"The survey offers some hope that the manufacturing sector may now have passed the worst," said Ruth Miller, an economist at Capital Economics. "However, we will need to see a few more upbeat surveys before a renaissance in U.K. manufacturing can be declared."
The BOE’s nine-member committee will announce its next interest-rate decision and publish new forecasts on Thursday. It said last month that external factors weren’t having a material impact on the U.K., a view reinforced by the Markit survey. The company’s report on services, the largest part of the U.K. economy, will be published Wednesday.
The index of new orders rose to 56.9, the highest in 15 months, with a gauge of export demand also improving. Readings above 50 indicate growth.
There’s a “tentative suggestion that the manufacturers are pulling out of their recent funk,” said Rob Dobson, a senior economist at Markit. “The revival of overseas sales is a particularly encouraging aspect of the latest survey, helping to dispel fears that global demand is slumping.”
The report also showed that employment in manufacturing rose for a 30th month, though employment levels at small companies were barely changed. Input prices declined, reflecting the impact of lower commodity prices on raw materials.