UK manufacturing growth hits 16-year high

The UK's manufacturing sector grew at its fastest rate for 16 years in November, a closely-watched survey suggests. The purchasing managers' index (PMI) climbed to 58, compared with a revised rate of 55.4 in October, well ahead of analysts' expectations. The figure was boosted by record growth in manufacturing jobs, said data firm Markit, which helps compile the survey. It said the strong growth was timely given the government's spending cuts. An index reading above 50 indicates expansion.

The strong data, and similarly encouraging manufacturing figures from around the world, particularly China, helped to push UK shares higher. The FTSE 100 index was up 109 points, or 2%, at 5,637 in mid afternoon trading. "The UK PMI surged to a 16-year high in November, confounding the consensus forecast of weaker growth," said Rob Dobson at Markit.

"The stand-out number was the survey record increase in employment, raising hopes that job creation in manufacturing can play a wider role in broadening and sustaining the recovery."

The government has stressed the need for exports to play a greater role in future economic growth, particularly in light of its austerity measures that are expected to hit consumer spending. Manufacturing currently accounts for about 13% of the UK's total economic output.

'Hugely encouraging'

Manufacturing production rose in November at its fastest pace since May due to higher demand in the UK and overseas, Markit said.

However, it added that cost pressures had also increased sharply as inflation continued to rise. Analysts were particularly upbeat following the survey.

"It's a very strong outcome," said Philip Shaw at Investec. "It may well be that we are beginning to see a bigger rise in exports which could lead to a rebalancing of the economy. It's hugely encouraging."

Howard Archer at IHS Global Insight described the survey as "superb".

"The data are particularly welcome news as it is vitally important that the UK recovery is on as firm a footing as possible before the fiscal tightening really starts to bite from early 2011, starting with January's VAT hike."

Source the BBC