Man­u­fac­tur­ing surge helps bol­ster econ­omy

The Daily Telegraph - - Business - By Tim Wal­lace

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.

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