‘Robust’ performance by UK manufacturing

Hugo Duncan
2 Aug 2010

British factories enjoyed a strong start to the second half of the year despite muted demand from overseas.

A monthly health-check on the manufacturing sector today showed the rate of expansion slowed in July but still remained robust.

It followed an impressive first half of the year when manufacturers bounced back from the worst recession since the Great Depression.

Exports remained subdued however, as the pound's recovery hit demand and the eurozone, Britain's biggest trading partner, struggled.

The pound jumped to a five-and-a-half month high against the dollar — up 1.23 cents to $1.5813 — as traders bet the recovery in the UK economy will last.

Mark Bolsom, head of UK trading at Travelex, said: “Momentum is building in the UK economy, which seems to have turned a corner since the contagion fears during the eurozone crisis two months ago.”

Markit and the Chartered Institute of Purchasing and Supply said their index of activity in the manufacturing sector slipped from 57.6 in June to 57.3 in July.

That was better than expected in the City and still well above the 50 cut-off point between boom and bust.

ING economist James Knightley said: “This offers encouragement that strength in private-sector activity can more than offset the fiscal austerity measures that will curtail activity in the public sector.

But he added: “The one area of concern within the report is the third consecutive fall in export orders, which may reflect sterling's recent bounce, but also raises question marks about the strength of activity in key trade partner economies.”