UK manufacturing has grown at its fastest rate in more than two years in June, and new orders also rise quickly as the economy appears to be gaining forward momentum.
The Markit/CIPS Manufacturing Purchasing Manager Index, or PMI, leaped to 52.5 from an upwardly revised 51.5 in May, Monday’s data showed, beating analysts’ forecasts who expected a score of 51.5.
That is the highest level for the manufacturing PMI since May 2011.
The average level for the three months to June represented the strongest growth in manufacturing since the second quarter of 2011. Markit says this suggests that factory output rose by around 0.5% in the second quarter.
Rob Dobson, Market’s senior economist, said the PMI taken with other indicators of a stable retail and construction sector points to overall quarterly economic growth of at least 0.5% compared with the first quarter.
“The near-term outlook for output also remains on the upside,” he added, quashing the likelihood that the Bank of England will opt for further quantitative easing at its meeting this week.
Both manufacturing and new business components of the PMI index were at their strongest since early 2011. This was driven in part by signs of stronger domestic and overseas demand for British goods, including in Europe.
“The stronger PMIs in the past three months provide some confidence that we’ll see a manufacturing contribution to growth in the second quarter with a bit more momentum building into the second half of the year,” said EEF’s chief economist Lee Hopley. “This, alongside other tentative forecasts about modest growth, is a cause for cautious optimism. Activity indicators across Europe also made gains providing some hope that the UK’s biggest market will help, rather than hinder, growth in the coming months.”
The new manufacturing data comes out on the first day of Mark Carney’s new job as governor of the Bank of England. Commentators, and the markets, are hoping the so-called “rock god” of banking will help haul the UK economy out of its torpor.