UK manufacturing figures boost recovery hopes

Better-than-expected news from manufacturers fuelled recovery hopes today after a survey showed output at its highest level for almost two years last month.

The Chartered Institute of Purchasing & Supply's (CIPS) headline activity index - where a score over 50 registers growth - reached 53.7 in October, its highest level since November 2007.

The jump from an upwardly-revised September score of 49.9 is the third biggest monthly rise in the survey's history.

CIPS chief executive David Noble said: "It appears that the manufacturing sector has turned a corner and is starting to pull itself out of recession."

The CIPS survey said there were "marked rebounds" in expansion rates for both production and new orders, although Mr Noble said manufacturers remained "highly vulnerable".

"The sector has been so hard hit since the recession began that it will be a long time before it returns to its previous level," he said.

Export levels also rose for the third successive month helped by a weak pound, although staffing levels in the sector fell for the 18th month in a row.

But Jeegar Kakkad, senior economist at the EEF manufacturers organisation, warned of the potential danger ahead when economic stimulus measures are unwound next year.

"We still can't take a strong, sustainable recovery for granted. The fourth quarter was always going to be better than the rest of the year and with fiscal stimulus set to be withdrawn in January, the dangers of a double dip are still very real," he said.

The figures follow shock data showing a 0.4 per cent decline in UK output during the third quarter of 2009 when experts had predicted a pull out of recession - partly based on deceptively strong industry survey readings.

The Bank of England will decide this week whether to give a further boost to the economy - with policymakers expected to step up their quantitative easing programme by £50 billion.

IHS Global Insight's Howard Archer said: "The purchasing managers' surveys appear recently to have been overstating the strength of UK economic activity.

"Nevertheless, taken at face value, the PMI survey raises hopes the industrial sector will expand in the fourth quarter for the first time in two years, helping the overall economy to finally return to growth."

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