UK industrial output jumps in March

UK industrial production picked up in March, boosting hopes that weak overall growth in the first quarter of the year was a blip.

On a monthly basis, industrial production rose 0.5 per cent in March compared with the previous month, notably stronger than analysts had expected and the best performance in six months.

Sterling jumped on the data to $1.56 against the dollar, its highest level since late December 2014. The pound has been performing strongly since the Conservative general election victory and on renewed speculation that an interest-rate increase could come earlier than the market expects.

The monthly rise took the rate of industrial production growth in the first quarter of the year to 0.1 per cent, the Office for National Statistics said on Tuesday, up from the -0.1 per cent it had pencilled in at the time of the preliminary GDP estimate.

As industrial production accounts for less than 15 per cent of total GDP, the revisions will not be sufficient to significantly change the disappointing 0.3 per cent overall growth recorded in the first quarter.

But the better than expected data provided reassurance to economists that the manufacturing sector can continue to expand. Manufacturers have been struggling against the twin head winds of the strong pound and weaker business investment spending.

Dominic Bryant, economist at BNP Paribas, said that with industry finishing the first three months of the year on a strong footing, it was likely that momentum would be sustained into the next quarter and that GDP growth would "bounce back".

Martin Beck, senior economic adviser to the EY Item Club, said the data reinforced the view that the GDP estimate "is ripe for upward revision over time."

Manufacturing output, a subsection of the overall industrial sector, was up 0.4 per cent in March, with pharmaceuticals, furniture and the repair of ships and aircraft leading the field.

Vicky Redwood, chief UK economist at consultancy Capital Economics, said that the figures "tentatively suggest that the recovery in the sector is starting to get back on track."

But others warned that the economy still has a long way to go before there is any sort of meaningful rebalancing.

David Kern, chief economist at the British Chambers of Commerce, said that while it was encouraging to see progress, the industrial sector was still "lagging behind" other parts of the economy, in particular services.

"The government must make every effort to support the manufacturing industry, particularly by encouraging more firms to explore international markets," he said.

The production and manufacturing industries remain 10.2 and 4.8 per cent respectively below their pre-recession peak.

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