Surprise manufacturing jump boosts economy

Manufacturers gave a boost to the UK economy today after the sector posted its strongest monthly growth in nearly eight years during March.

The surprise 2.3% jump in manufacturing  output raised hopes that the latest estimate of economic growth for the first quarter of 2010 will be revised upwards from the current level of 0.2%.

Economists said manufacturers were benefiting from stronger export demand as the weaker pound boosted competitiveness overseas.

Howard Archer, chief UK economist at IHS Global Insight, added: "This is a really spectacular performance by the manufacturing sector, which is a real shot in the arm for the economy."

Manufacturing output and the wider measure of industrial production rose by 1.2% across the first quarter of 2010, stronger than the 0.7% gain the ONS assumed in its initial estimate of Q1 GDP growth.

Barring other changes, Jonathan Loynes, chief European economist at Capital Economics, said the GDP estimate is likely to be revised up to 0.3% on May 25.

He added: "Of course, industry still has a lot of ground to make up after the deep recession - production is still down by over 10% from its peak back in 2007. But the various forward-looking surveys point to further solid growth in output over the coming months."

The ONS said the largest increase in output came in transport equipment, helped by a 52.3% year-on-year jump in motor vehicle manufacturing as the car industry benefited from the final month of its scrappage scheme.

Increased production of cutlery, tools and general hardware also boosted the metals sector, according to the ONS.

Compared with March 2009 at the height of the recession, industrial output is now 2% higher, the strongest annual growth since May 2004.

Ben Read, an economist at the Centre for Economics and Business Research, said the UK recovery appeared to be gaining some momentum.

"However the continued problems in the eurozone, combined with the potential for prolonged political uncertainty here, could easily hold back the recovery in the second half of this year," he added.

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