UK economy extends recovery as factories boost output, wages rise
8th April 2014

Britain's economy extended its strong recovery into this year, data showed today (Tuesday), with manufacturing jumping by much more than expected, companies reporting a buoyant first quarter and signs of a pick-up in wages.

The pound surged as the Office for National Statistics said manufacturing output expanded by 1.0 percent in February from January - its biggest increase since September last year.

Factory production was 3.8 percent higher than in the same month of 2013, the biggest increase by that measure in three years.

Economists in a Reuters poll had expected a month-on-month rise of 0.3 percent and a 3.1 percent increase for the year.

Overall industrial output, which includes power generation and Britain's North Sea oil production as well as manufacturing, climbed 0.9 percent on the month, recovering from a weak January when bad weather hampered North Sea oil and gas production.

The figure was stronger than a forecast of a 0.3 percent increase in the Reuters poll.

Compared with a year ago, industrial output was up 2.7 percent, the ONS said.

British Chancellor of Exchequer George Osborne last month announced measures to help manufacturers under long-standing plans to make Britain's economy less dependent on consumer demand.

After staging a surprisingly fast recovery in 2013, Britain's economy is growing more quickly than almost all other developed countries, a fillip for Osborne who will attend a meeting of the International Monetary Fund this week.
Last year, he resisted pressure from the International Monetary Fund to rein in the government's austerity programme and spend more to get the recovery going.

With the recovery accompanied by subdued inflation, Bank of England policymakers, who meet this week, are in no rush to raise interest rates from their record low of 0.5 percent. The Bank has signalled the second quarter of next year as the most likely timing for a rate hike.

There were still more signs on today(Tuesday) of gathering strength in Britain's economy.

A survey by the British Chambers of Commerce showed six key manufacturing balances, including investment plans, hit all-time highs in the first quarter and services were strong too.

A second survey showed British employers are raising the salaries they offer to new permanent staff at the fastest rate in nearly seven years as they struggle to fill vacancies.

But despite the recent strong growth, Britain has a way to go to recover fully from the effects of the financial crisis.
Manufacturing remains 8.2 percent smaller than it was when British overall economic output hit its peak in early 2008.
The ONS said in the three months to the end of February - a smoother reading than the sometimes volatile monthly numbers - manufacturing and industrial production were both up 0.8 percent from the previous three months, picking up a bit of speed.

It remains to be seen if the strength in manufacturing continues. A survey of purchasing managers published in last week’s Glazine showed Britain's factory sector saw its slowest growth in eight months in March.