Weak pound offers lifeline to factories

RECOVERY in Britain’s hard-hit manufacturing sector is continuing apace, boosted by record growth in new exports and the strongest output growth since September 1996, a leading survey revealed yesterday.

The CIPS/Markit manufacturing purchasing managers’ index (PMI) recorded a reading of 56.6 in February, unchanged from January’s fifteen-year high and well above the 50 mark that separates growth from contraction. This marked the fifth consecutive month of expansion in the sector.

Manufacturing production increased for the ninth consecutive month with the rate of growth accelerating to its fastest since September 1996. Encouragingly, the improvement was seen across all sectors.

David Noble, chief executive of the Chartered Institute of Purchasing & Supply, said: “The manufacturing sector seems firmly back on the road after this severe recession. It’s particularly positive that the recovery is broad-based and being partly driven by new order growth rather than just re-stocking.”

Growth in new exports also accelerated to its fastest rate since January 1996, with the sub-index hitting 60.4.

Jonathan Loynes, chief European economist at Capital Economics, said this suggests that the pick-up in global activity and the more competitive exchange rate are boosting external demand for UK goods.

However, he added: “While the industrial sector seems finally to be feeling the beneficial effects of the lower pound, it is still very unlikely that this will fully compensate for the weakness of the domestic consumer sector.”

Meanwhile, a survey by the Engineering Employers Federation, showed that UK output returned to growth at the start of 2010 for the first time in more than a year.

Across the Channel, the eurozone manufacturing PMI posted 54.2, its highest reading since August 2007. The improvement was driven by the fastest growth of output since March 2007.

Germany recorded the strongest growth in output while the downturns in Spain, Ireland and Greece continued. Heavily indebted Greece saw its sharpest monthly fall in production since last April.