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UK manufacturing growth boost lifts recovery hopes

Manufacturers today fuelled hopes they will play a role in the UK's recovery after posting the sector's fastest rate of growth in 16 years last month.

The Chartered Institute of Purchasing & Supply's (CIPS) activity index, where a reading over 50 indicates growth, had been expected to fall back but instead jumped to 58, up from September's 10-month low of 53.5 and October's 55.4.

Employment rose at its quickest pace since the survey began in 1992 as a result of stronger demand led by new export orders. Companies' order books are also looking strong, offering hope that the growth will continue.

Report author Rob Dobson, a senior economist at Markit, said November's figures were welcome news given the UK's need to rebalance the economy towards exports in the face of an anticipated slowdown in consumer spending.

Exports have been boosted by the pound's drop against most currencies, making it cheaper for overseas countries to import goods manufactured in the UK.

However, there were warnings about the impact of significant price hikes in raw materials, which will lead to inflation and could dampen demand.

David Noble, chief executive of CIPS, said the next few months will be far from an easy ride for manufacturers.

"Increased purchasing activity is adding to input cost inflation, which is likely to continue rising for the foreseeable future," he added.

According to today's report, manufacturers expect modest growth in output in the next three months, although with inflationary pressures intensifying the confidence of firms is the weakest since January.

The Government's Office for Budget Responsibility this week lowered growth in 2011 and 2012 from 2.3% to 2.1% and from 2.8% to 2.6% respectively.

Howard Archer, chief European economist at IHS Global Insight, said: "For now at least, the manufacturing sector is holding up very well.

"The key question going forward though is how well can manufacturing activity hold up as stock rebuilding draws to a close, tighter fiscal policy weighs down on domestic demand, and likely slower global growth threatens foreign demand for UK products".

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Reports say UK manufacturing's recovery may be stalling
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Manufacturing is ‘the strongest performing sector in the UK’

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