British manufacturing output beats expectations with 1.2% rise

September increase reverses drop in previous month and boosts hopes of manufacturing revival

Britain’s manufacturers ramped up production in September, according to official figures, helping to keep hopes alive of an industrial renaissance, despite the news of nearly 1,800 shipbuilding job losses.

The Office for National Statistics said on Wednesday that manufacturing output increased by a better than expected 1.2% in September, reversing the 1.2% drop a month earlier.

The wider measure of industrial production, which also includes mining and quarrying, and energy supply, was up by a more modest 0.9%.

The ONS said the relatively strong performance from manufacturing meant industrial production increased by 0.6% over the third quarter of the year – slightly higher than the 0.5% included in the first estimate of third-quarter GDP last month.

City analysts said the figures suggested that, despite high-profile setbacks such as the loss of jobs at BAE dockyards, manufacturing was continuing to recover from the precipitous decline seen during the great recession of 2008-09.

The coalition is hoping that a manufacturing revival – dubbed the “march of the makers” by the chancellor – will help to rebuild UK plc, and a continued improvement in the sector could help to assuage fears of a lopsided economic recovery that is too focused on consumer spending.

“A marked rebound in output in September from August’s surprise drop indicates that the manufacturing sector’s upturn remains intact and it enjoyed a very decent third quarter overall,” said Howard Archer at the consultancy IHS Global Insight. However, overall industrial production still remains more than 12% below its peak in mid-2008.

The ONS said the pharmaceutical sector – a long-time strength for the UK – had performed particularly strongly in September, as had transport, led by Britain’s thriving carmakers, and computers.

Lee Hopley, chief economist of the manufacturers’ group the EEF, said: “There were strong gains in pharmaceuticals, electronics and transport, with the latter benefiting from a combination of new products, solid overseas demand and longer order books. With signs pointing to firm activity in the final months of this year, our forecasts suggest that the second half of the year will be the strongest six-month period for the sector in three years.”

David Kern, chief economist at the British Chamber of Commerce, said: “We remain cautiously optimistic about the sector’s ability to recover despite the tough economic environment at home and abroad.”

Simon Wells, of HSBC, said it was not yet clear where the market was for the extra products manufacturers were churning out: “The rapid pace of recovery raises the question as to where all the output is going. In the three months to August, UK goods exports contracted by 1.5% while industrial production rose 1.1%.

“This suggests output is being consumed domestically. Inventories or investment could be rising fast but given the fiscal consolidation and falling real wages, we continue to be surprised by the pace of recovery.”

He said the latest figures, together with a run of strong recent surveys from across the economy, would be likely to prompt the Bank of England to increase its growth forecast when it presents its quarterly inflation report next week.

Consultancy PwC, in its latest assessment of the economy, published on Thursday, says it expects GDP growth to pick up steadily, from 1.4% this year to 2.4% in 2014: “After a couple of sluggish years in 2011 and 2012, the UK economy is showing clear signs of recovery this year and is now gathering real momentum. The services sector has been leading the growth but latest data sources indicate that manufacturing and construction are also now starting to recover.”

Workers are unlikely to reap the benefits for some time, however: by 2017, PwC expects earnings to remain 6% below 2008 levels, in real terms. John Hawksworth, its chief economist, said: “Upward pressure on energy and food prices could act as a restraint on growth, as could an eventual rise in interest rates later this decade.” © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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