Better exports boost manufacturing sector

Stronger exports helped the manufacturing sector record its best performance for more than two years in July as its recovery gathered pace.

Activity rose to a 28-month high of 54.6 in the latest Markit/CIPS purchasing managers' index - in which the 50 level separates growth from contraction. It was up from 52.9 in June and has now improved five months in a row.

It is the latest positive sign for the UK economy after gross domestic product (GDP) doubled to 0.6% in the second quarter, including a 0.4% rise for manufacturing.

Britain's dominant services sector has led the way out of the depths of the downturn but Samuel Tombs of Capital Economics said the latest figures were an encouraging sign that the recovery in the industrial base was also gathering momentum.

"It seems increasingly likely that the manufacturing sector will share in the economic recovery now under way and will assist in the economy's long-overdue rebalancing," he said.

The survey showed new orders were at their highest level since February 2011 and while the domestic market remained the prime source of these contracts, overseas demand was also up.

New export business rose at the fastest pace for two years, reflecting increased sales to Australia, China, the eurozone, Kenya, Mexico, the Middle East, Nigeria, Russia and the US, the report showed.

The overall improvement was led by accelerated output and orders in the consumer goods sector though other areas also picked up.

Manufacturing employment rose too, for the third successive month, with the rate of job growth reaching a two-year high, the figures showed.

Rob Dobson, senior economist at Markit, which compiled the survey, said the sector was building on the foundation of second-quarter growth.

He said that while the domestic market was the prime source of new contracts, the strong export component saw manufacturers benefit from overseas regions such as the eurozone moving closer to stability.

David Noble, chief executive at the Chartered Institute of Purchasing and Supply, said: "The much-vaunted march of the makers has finally materialised.

"Exports have been critical to this success, but it is the broad-based nature of the sector's performance which endorses the view we are on track for solid and accelerated growth in the coming months."

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "Coming on the back of a pick-up in output in the second quarter and some signs of life in European markets, risks seem to be abating.

"There are now more reasons to be confident that manufacturing will make a more positive contribution to growth through the rest of the year."

PA