Factories see healthy rate of growth

BRITISH manufacturing production expanded at a robust pace in July, recording the strongest annual growth rate since the end of 1994, official data showed yesterday.

Manufacturing production was up 4.9 per cent on the year, while the monthly rate held steady at 0.3 per cent. The wider industrial production measure also grew 0.3 per cent in July on the previous month, taking the annual growth rate to 1.9 per cent.

But while economists cheered the upbeat manufacturing figures, they warned that the sector was likely to run out of steam in the third quarter.

Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM?Club, said: “We are likely to see activity cool as the second half of the year progresses, as the boost from firms rebuilding their stocks begins to fade and the pace of the global recovery slows. But this doesn’t mean that a double dip is a prospect, rather a period of slower, patchy growth.”

Goodwin added that the strong annual growth rate must be put in context of the 15 per cent fall in manufacturing output during the recession. “It looks like it will take another three years for the sector to regain previous peaks,” he warned.

Economists also pointed to the timelier purchasing managers’ surveys, which show weaker expansion.

“Should the surveys continue to soften over the coming months, there would be a real danger that the industrial recovery grinds to a complete halt in the fourth quarter and beyond,” says Capital Economics’ Jonathan Loynes.