LONDON, Sept 8 - Manufacturing output in Britain rose at its strongest pace since last November in July, a further sign that a long-awaited recovery in the sector may finally be underway. The Office for National Statistics said output, led by computers, rose 0.5 percent on the month although was still 0.3 percent lower than a year earlier, such has been the slump in the sector, which accounts for a fifth of the economy, in recent years. The 0.5 percent figure was the second consecutive monthly rise and was considerably stronger than economists had expected. A recovery in manufacturing is widely thought to hold the key to when interest rates rise again after being cut for the past three years. The Bank of England cut rates in July to a 48-year low of 3.5 percent but futures markets, faced with a barrage of improving economic data, are now pricing in a rate hike by the end of the year.
Statisticians said there were rises in seven of the 13 manufacturing subsectors, although eighty percent of the rise came from the electrical and optical sector, which includes computers. The wider measure of industrial output, which includes North Sea oil and gas production, rose 0.3 percent on the month, in line with forecasts, to stand 0.4 percent lower than a year earlier. The ONS now sees manufacturing and industrial production rising at around 1.0 percent a year, the strongest trend rate of growth since January 2001. The ONS also released data on factory gate prices showing that manufacturers are still being squeezed on margin in spite of their higher output.
Output prices rose only 0.2 percent in August while input prices, swollen by a six percent rise in oil prices during the month, rose 1.1 percent on the month, in line with expectations. Oil prices have now fallen back slightly, however, with international benchmark Brent blend crude trading around $27 a barrel on Monday, down from recent highs near $30 a barrel.//