Manufacturing sector buoyed to two-year high

24-08-2006

Increased orders helped boost the continuing recovery of Britain's manufacturing sector in June, according to the latest purchasing managers' index (PMI) from the Chartered Institute of Purchasing and Supply and the Royal Bank of Scotland.

June's rating accelerated the sector's expansion above the nominal level rating of 50 by racing to 55.1, a substantial increase from its 53.5 score in May.

It attributed the improved sales to a growth in employment, a reduction in inventory holdings and a strong growth in orders, leading to a two-year high in June and an 11th consecutive growth of expansion in the sector.

"The manufacturing sector, which for some time appeared to have missed out on the global industrial recovery, now seems well and truly at the party," said John Butler of HSBC.

Britain's manufacturing sector had been struggling to keep up with other areas of the economy, including the booming property market. Now it appears the recent period of stagnation has ended, reflecting the expectation of increased GDP by 0.7 per cent forecast on Friday by the Centre for Economics and Business Research.

It is unlikely that news of the recovering manufacturing sector will provide a sufficient impetus for the Bank of England to consider raising interest rates in the near-term, given the current strength of the pound and uncertainty over the future of global markets.

Howard Archer of research firm Global Insight, who earlier today said a no-change verdict at this Thursday's meeting of the monetary policy committee (MPC) was a "nailed-on certainty", conceded that today's PMI survey "moderately bolsters" the case for a rate rise before the end of the year.


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