British manufacturing grows at fastest rate since 1994

10th March 2011, Comments 0 comments

British manufacturing output expanded in January at the fastest annual rate for 16 years, official data showed on Thursday, boosting hopes of economic growth in the first quarter of 2011.

Manufacturing output jumped 6.8 percent in December compared with the level a year earlier, the Office for National Statistics (ONS) said in a statement, published before an interest rate decision from the Bank of England.

That was the most impressive rate since November 1994 and topped market expectations for a gain of 6.5 percent, according to analysts polled by Dow Jones Newswires.

Output rose by 1.0 percent in January compared with December, the ONS added. That was the largest monthly growth rate in 10 months and beat market expectations for a 0.8-percent increase.

Industrial production, which includes mining and quarrying, as well as electricity, gas and water supply, rose 0.5 percent in January and 4.4 percent year-on-year. The annual rate was the fastest since December 1994.

"Today's data support our view that the first quarter's GDP outturn will show a bounce-back in overall activity, with net exports making a sizeable contribution as the manufacturing recovery continues apace," Barclays Capital analyst Chris Crowe said.

"However, we expect sagging consumer sentiment to continue to weigh down on services activity."

Separate data Wednesday showed that Britain's trade deficit narrowed by more than expected in January as exports hit a record high, which also sparked hopes of an economic rebound in the first quarter.

The deficit -- the difference between goods exported and imported -- shrank to £7.1 billion (8.3 billion euros, $11.5 billion) in January. That was the lowest level since February 2010.

Thursday's data was published before the latest interest rate decision from the Bank of England, which is forecast to leave borrowing costs at a record low level of 0.50 percent.

The British economy still shrank by more than expected in the final three months of last year as harsh wintry weather hampered prospects of a swift recovery.

Gross domestic product (GDP) -- the total value of goods and services produced in the economy -- contracted 0.6 percent in the three months to December. That was largest GDP drop since the second quarter of 2009.

© 2011 AFP

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