UK manufacturing sector’s performance ‘pleasing’

Manufacturers in the UK recorded another month of steady growth yesterday as firms continued to defy recent gloomy forecasts over the sector’s recovery.

With production up by 0.3 per cent in July on a month earlier, the Office for National Statistics said the sector posted its best three-month result in 15 years following growth of 4.3 per cent in the period to July against a year ago.

Manufacturing is now growing at an annual rate of 4.9 per cent – the best pace since the end of 1994 – as the sector recovers from a brutal recession.

But other surveys in recent weeks have suggested that the rally may be fading as firms begin to see much slower demand.

The sector has been boosted so far by customers replacing stockpiles used up in the recession, although this temporary effect is expected to reduce as the year progresses. Manufacturers are also braced for weaker demand as global austerity measures kick in.

The ONS said output from the wider production industries, which includes the utilities and mining sectors, also increased by 0.3 per cent during July after maintenance shutdowns in the oil and gas sector caused output to fall in June.

Jonathan Loynes, chief European economist at Capital Economics, said industrial production was likely to fall short of the 1.1 per cent gain achieved in the second quarter of 2010.

He added: “While July’s figures provided some comfort that the industrial recovery remains on track for now, they certainly do not eliminate the danger of a double-dip in the UK economy later this year or in 2011.”

Continued uncertainty over the pace of the economic recovery means Bank of England policymakers are expected to keep interest rates on hold today.