Photographer: Simon Dawson/Bloomberg

U.K. Factory Production Hits Two-Decade High as Exports Grow

  • Factories expect overseas demand to grow next quarter
  • The cost of production has cooled as inflation eases off

U.K. factory production reached a two-decade high last quarter as optimism about export orders swelled to the highest since the 1970s.

A Confederation of British Industry survey showed the volume of output rapidly grew in the three months to July, with the CBI index reaching its strongest reading since 1995.

Factories are “upbeat in their expectations for overall demand in the quarter ahead, but particularly for overseas demand,” which is driving stronger output, the report said. A gauge of expectations for export orders for the next three months climbed to the highest in 40 years.

Inflation pressures eased as a measure of domestic prices fell while export prices were unchanged. Both are expected to cool further in the coming three months. U.K. consumer-price inflation unexpectedly dropped to 2.6 percent in June from 2.9 percent in May.

With manufacturing accounting for about 10 percent of the economy, the strength shown in the CBI numbers may only have a limited impact on gross domestic product. Data on Wednesday is forecast to show expansion of 0.3 percent in the second quarter, after 0.2 percent at the start of the year.

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