UK manufacturing up at 16 year peak

The UK's manufacturing sector activity last month hit levels not seen in 16 years, far exceeding analysts' expectations.

The Markit / Chartered Institute of Purchasing and Supply (CIPS) manufacturing index was up at 58 in November from 55.4 in October. This was against analysts predictions of slight slip in the index.

The development is expercted to be welcome news to the coalition government coming as it does in the wake of the Office for Budget Responsibility (OBR) raising its growth forecasts for the current year to 1.8 per cent from 1.2 per cent.

But with tough times expected further ahead, the government would be hoping to keep up the tempo into the next year, which would help to provide extra jobs to offset those lost due to the public spending cuts.

The OBR also revised downwards its growth estimate for 2011 to 2.1 per cent as against an earlier estimate of 2.3 per cent.

According to Markit senior economist Rob Dawson, stronger manufacturing expansion may well be needed to offset a likely slowdown in consumer spending as austerity measures start kicking in.

Some analysts said the figures were excellent though manufacturing constitutes only 12.8 per cent of the British economy.
 
They say the data are especially welcome news as it is vitally important that the UK recovery was on as firm a footing as possible before the fiscal tightening really starts biting from early-2011, starting with January's VAT hike.

However, the biggest fiscal squeeze since World War II may weigh on the economy. According to the Treasury's fiscal watchdog the UK faces a ''sluggish'' recovery.