Manufacturing is stronger than feared

Chris Williamson - Markit

Chris Williamson - Markit

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Britain’s production sector posted its strongest growth for six months in March, suggesting a slightly better start to the year for the economy than first feared.

The pound rose to a five-month high against the US dollar after official figures showed the sector grew by a better-than-expected 0.5 per cent, boosted by a bounce from North Sea oil and gas.

The overall picture, in fact, remains one of a manufacturing economy that is struggling to expand in the face of the stronger pound and heightened business uncertainty.

Chris Williamson

Within production, manufacturing also beat forecasts with expansion of 0.4 per cent, led by pharmaceuticals, while its performance in February was revised up too.

The figures from the Office for National Statistics now show the production sector grew by 0.1 per cent in the first quarter, compared to a previous estimate that it shrank by 0.1 per cent over the period.

The ONS said this would have a “minimal” impact on recent figures showing that wider gross domestic product growth slowed to 0.3 per cent for the first three months of the year.

Vicky Redwood, chief UK economist at Capital Economics, said the data “tentatively suggest that the recovery in the sector is starting to get back on track”, amid hopes that the wider upturn, currently skewed towards consumer growth, can be rebalanced.

“It does suggest that the industrial sector may have turned the corner, no doubt helped by the lower oil price.”

Chris Williamson, chief economist at Markit, said the data showed encouraging signs of growth in March which would be “widely seen as upping the odds of interest rates rising later this year”.

But he added: “The overall picture, in fact, remains one of a manufacturing economy that is struggling to expand in the face of the stronger pound and heightened business uncertainty.

“The near-stagnation of the sector over the first quarter is a reminder of how little progress the UK has made in terms of rebalancing towards manufacturing and will probably do little to persuade the Bank of England that the economy is ready for higher interest rates.”

Howard Archer, of IHS Global Insight, said: “It is important for balanced UK growth that the manufacturing sector can achieve decent expansion going forward.”