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UK factory growth hits a 16-year high

ACTIVITY in Britain’s hard-hit manufacturing sector grew at its fastest rate last month since September 1994 thanks to a sharp increase in the growth rate of new exports, a leading survey showed yesterday.

The Markit/CIPS manufacturing purchasing managers’ index (PMI) showed that factory activity rose to 58 in April from 57.3, well above the 50 level that separates expansion from contraction.

The strong UK survey comes hard on the heels of yesterday’s Markit Eurozone PMI and the US ISM Manufacturing survey, which also revealed healthy starts to the second quarter across the Channel and in the US.

After a sustained period of job shedding in the sector as manufacturers sought to cut costs, employment increased for the third time in the past four months in April, and at the fastest rate since February 2007.

The upbeat PMI indicates that manufacturing output should grow by as much as two per cent in the last quarter, suggesting the sector will provide a strong contribution to second quarter GDP, said Rob Dobson, senior economist at Markit.

Economists were encouraged by the strong survey results – Capital Economics’ Vicky Redwood said: “April’s Markit/CIPS report on manufacturing provided further evidence that the economic recovery, for now, is building a decent amount of momentum.”

And Hetal Mehta, senior economic adviser to the E&Y Item Club, noted that the acceleration in both new orders and the increase in the business backlog is good news for future output.

However, Mehta warned: “There is a nagging concern that the PMI might be overstating the scale of the recovery – official data has lagged behind for some time, but other surveys from the CBI and BCC do suggest a more measured pace of recovery.”

Official data suggested manufacturing output rose by only 0.7 per cent in the first quarter.