BRITISH manufacturing surged in August, with growth outstripping the Eurozone and output reaching levels not seen for nearly two decades.
Markit’s purchasing managers’ index (PMI) for the sector leapt to 57.2, with any figure above 50 indicating growth. The headline reading is the highest since early 2011, but the expansion of both output and new orders are the fastest since 1994.
Deutsche Bank noted that if the PMI results for the other major sectors held where they are now, then the composite PMI figure would shoot above 60 for the first time ever.
Berenberg’s chief UK economist, Robert Wood, added: “Driven by super loose monetary policy and a sense of relief that the worst is now over, domestic momentum is just getting stronger and stronger”.
The pound bounced against the euro after the announcement yesterday morning, climbing up to a two month high, breaking about €1.73 during trading yesterday.
Despite the bullish sentiment among manufacturers, firms are still sceptical about rushing into increasing staff numbers. The employment section of the index remained at 51.6, indicating a more reserved and steady expansion.
Capital Economics’ UK economist Samuel Tombs sounded a note of caution to the positive numbers: “Admittedly, we are concerned that the sector’s recovery is susceptible to renewed weakness. For a start, the revival so far has been very dependent on stronger domestic demand, particularly from households.”
Tombs concluded: “A durable recovery will require a much broader revival in demand.”
The Chartered Institute of Marketing and Bloomberg reinforced the sense of an emerging recovery, finding that a wave of optimism has now reached British businesses.
Marketing firms are five times as confident about the state of the economy as they were only 12 months ago, with 84 per cent of professionals saying they are now as or more confident that they will see economic growth in the next year.