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U.K. Manufacturing Expands at Record Rate, EEF Says (Update1)
2010-09-06 07:57:44.878 GMT
(Updates with markets in fifth paragraph.)
By Scott Hamilton
Sept. 6 (Bloomberg) -- U.K. factory production grew at a
record pace in the third quarter on surging export demand, the
Engineering Employers Federation said.
The number of manufacturers saying sales rose in the three
months through September exceeded those reporting declines by 33
percent, compared with 30 percent in the second quarter, the EEF
and accountancy firm BDO Stoy Hayward LLP said in a quarterly
survey released today in London. That's the highest since the
report began in 1995. A gauge of exports also rose to a record.
While Britain's economy grew at the fastest pace since 2001
in the second quarter, recent data suggest growth may be
moderating. Manufacturing, services and construction growth all
weakened in August, reports last week showed, adding to the
dilemma Bank of England officials face as they mull whether to
expand monetary stimulus or withdraw it.
"The recovery does seem to be under way and there appears
to be a bit of momentum behind it," EEF Chief Economist Lee
Hopley said in an interview. "There's a pretty positive outlook
for the next three months. Orders are coming in, but that's not
to say there aren't still question marks over 2011."
The U.K.'s benchmark stock index, the FTSE 100, rose 0.4
percent and was at 5448.21 as of 8:56 a.m. in London. The pound
gained 0.1 percent against the dollar and was trading at
$1.5453.
Manufacturing Forecast
Factory output, which accounts for about 13 percent of the
economy, will grow 3.7 percent this year, the EEF said, higher
than the 3.5 percent projection made in June. The group also
raised its estimate for 2010 economic growth to 1.5 percent from
an earlier prediction of 1.1 percent. Manufacturing growth will
ease to 3.2 percent next year, it forecast.
A gauge of export orders rose 7 points to 30 in the third
quarter, the EEF said. The pound has fallen about 21 percent on
a trade-weighted basis since the start of 2007, making exports
more competitive.
Survey responses showed sales in the Middle East and east
Asia were "particularly strong," and markets in the European
Union have been "better than expected" over the past two
quarters, Hopley said.
Bank of England Monetary Policy Committee member Charles
Bean said on Aug. 28 that Britain's economy "remains fragile"
and "further policy action may yet be necessary to keep the
recovery on track." While officials left the benchmark interest
rate on hold last month, Andrew Sentance voted for an increase
for a third month.
U.K. policy makers hold their next meeting on Sept. 9.
Rate Outlook
"I don't think there's anything that will materially
change the MPC's view of the world over the past month," Hopley
said. "I think we're likely to see the status quo probably
until the end of this year."
While measures of hiring and investment increased, the
number of companies saying domestic sales rose in the third
quarter exceeded those reporting declines by 20 percent,
compared with 24 percent the previous quarter.
"There are still a lot of unknowns about what's going to
happen in 2011," Hopley said. "No one can sneeze at the moment
because it all feels a bit finely balanced for companies looking
beyond the end of this year."
The group surveyed 519 companies from Aug. 4 to Aug. 25.
For Related News and Information:
For the most read U.K. economic stories: MNI UKECO <GO>
On U.K. trade: TNI UK TRD <GO>
On U.K. industrial production UKIPIMOM <Index> CN BN <GO>
Global economy watch: GEW <GO>
--Editors: Fergal O'Brien, Jennifer Freedman
To contact the reporter on this story:
Scott Hamilton in London at +44-20-7673-2976 or
shamilton8@bloomberg.net
To contact the editor responsible for this story:
John Fraher at +44-20-7673-2058 or
jfraher@bloomberg.net
