Boost for Osborne as factory growth hits seven-month high

Chancellor George Osborne being shown car manufacturing during a tour of Nissan, Sunderland on Friday.
Chancellor George Osborne being shown car manufacturing during a tour of Nissan, Sunderland on Friday.
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MANUFACTURING growth hit a seven-month high in February, according to a survey which adds to signs that Britain’s economy started 2015 on a strong footing, albeit one based mostly on domestic demand.

The latest Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) rose a full point to 54.1 in February from an upwardly revised January reading. That was comfortably above the 50 mark denoting growth.

The survey will cheer Chancellor George Osborne, who hopes strong economic growth over the last 18 months will persuade voters to hand his Conservative Party victory in the general election on May 7.

The PMI suggested British manufacturing output is growing at a quarterly rate of around 0.5 per cent, compared with a 0.2 per cent expansion in the final three months of 2014.

“This reinforces the picture of a broader growth revival in the UK so far in the opening quarter,” said Rob Dobson, senior economist at survey compiler Markit.

But he warned that the upturn relied on the manufacture of consumer goods, rather than the plant and machinery which would reflect improving business investment.

Official data last week showed business investment fell at the sharpest rate in nearly six years in the final three months of 2014, as tumbling global oil prices hit the North Sea petroleum industry.

The oil and gas industry supports around 16,000 jobs in Yorkshire.

News of a renewed fall in export orders further underlined Britain’s reliance on domestic demand to drive the recovery. Markit said many respondents linked this to a rise in sterling, which has strengthened by almost 7 per cent against the euro since the start of the year.

Factory gate prices fell at the fastest pace since September 2009, while prices paid by manufacturers for raw materials and energy continued to fall sharply, albeit at a slightly slower pace than in January.

“Waning inflation therefore looks set to continue to provide leeway for the Bank of England to push back that first rate increase until next year,” said Mr Dobson.

David Noble, chief executive at the Chartered Institute of Procurement & Supply, said rising levels of job creation - now in their 22nd month - demonstrate that the sector is in buoyant mood.

He added: “This is good news for the UK economy as higher staffing levels mean more opportunity for economic expansion.

“The consumer goods sector was the star of the show, where there were significant increases in activity

and stocks of raw materials continued to rise.

“With faster growth in new orders than at the beginning of the year, this increased momentum is once again attributed to the domestic market, as export orders lag behind.

“Though there was some growth in the Eurozone and elsewhere, this did not translate strongly enough to support increased new export orders.”