Manufacturing surge helps bolster economy
BRITAIN’S factories are booming, with industrial output now on its longest growth streak for 23 years.
The surge in manufacturing and mining is driving up growth in the wider economy, and the National Institute for Economic and Social Research (NIESR) believes GDP rose by 0.5pc in the three months to October, faster than any quarter so far this year.
Output in the sector has risen for six consecutive months, smashing expectations by growing at 0.7pc in September and 1.1pc over the third quarter as a whole, according to the Office for National Statistics. Factory output rose 1.1pc in the quarter with transport – mainly car production – up 3pc. Mining and quarrying grew by 2.1pc, while electricity, gas and other related utilities rose by 1.1pc. James Smith, an economist at ING, said: “Global growth and the effect of the weaker pound seems to be coming through in the manufacturing numbers” as the sector “fights back” against a slowdown.
Amit Kara, of the NIESR, believes this healthier growth will push interest rates higher. “If the economy continues to expand at this pace and inflation remains elevated, there is a case for the Bank of England to raise the policy rate to stop the economy from overheating,” he said. “Consistent with that, our latest forecast is conditioned on a 25 basis points increase in Bank Rate every six months such that the policy rate reaches 2pc in 2021.”
However, the construction sector has slipped into a recession, contracting for two consecutive quarters. Out- put fell by 0.9pc in the third quarter with sharp falls in work on commercial construction projects and on repairs and maintenance in the housing sector.
Infrastructure output fell by 1.2pc on the month and 2.1pc on the quarter, but new private housing and public housing construction both expanded in the quarter, up by 1.8pc and 4.9pc respectively. Overall construction output in September was still up 1.1pc compared with the same month of 2016, driven by a 5.4pc rise in private housing and a 14.6pc leap in public residential work.
Meanwhile, Britain’s trade balance deteriorated in the third quarter, rising by £3bn to £9.5bn. In particular, increased imports of machinery and fuel – partly due to the higher oil price – tipped the balance further into deficit.