UK manufacturing booms as new orders rise at fast clip

It is boom time once again for UK manufacturing after output and new orders rose at the fastest pace in almost 20 years in August, in a confirmation of the recovery's gathering momentum, The Telegraph newspaper reported.

Both Markit's Purchasing Managers Index (PMI) and the Chartered Institute for Purchasing and Supply measures showed the health of UK manufacturing improved at the fastest rate since 1994.

The industry's overall measure of activity in August for the industry stood at level last seen two-and-a-half years ago. Manufacturing contributes to 10 per of UK's GDP.

Analysts see the manufacturing rebound as a strong indicator of an accelerating pick-up in the recovery. According to IHS Global Insight's Howard Archer, the development fuelled hopes that the GDP growth could even surpass the 0.7 per cent quarter-on-quarter expansion achieved in the second quarter.

Manufacturing continues to remain 10 per cent smaller than before the crisis, but, after shrinking last year, now appeared to be rebounding strongly.

According to Samuel Tombs, UK economist at Capital Economics, the robust July and August PMI data suggested the pace of growth in manufacturing had surged from 0.6 per cent in the second quarter of the year to 2 per cent in the third quarter.

Meanwhile, India's manufacturing declined in August for the first time in over four years, even as factory activity in China picked up, AFP reported. Manufacturing decline in India came as another setback to government measures aimed at supporting an eroding currency, according to the report.

HSBC's Purchasing Managers' Index (PMI) for India, which offers a snapshot of manufacturing health, was down to unexpected low of 48.5 in August from 51.1 in July, as orders declined.

The PMI index, a widely-regarded indicator of economic momentum, signals contraction at sub 50 levels while a reading more than 50 suggests expansion.

The Indian data comes amidst diminished growth forecasts for the country for the financial year and looming worries that Asia's third-largest economy could be a only a step from away from a full-blown crisis.

HSBC revised its growth forecast to 4 per cent from 5.5 per cent while investment house Nomura India pared its projection down to 4.2 per cent from 5.0 per cent.

Worse, HSBC economist Leif Eskesen has warned that it was not the bottom, cautioning of ''deeper slowdown ahead.''

He did not expect to see any signs of recovery until the final quarter.

The most bearish forecast came from BNP Paribas, which slashed its forecast to 3.7 per cent from the 5.2 per cent target, saying India's "macro muddle" was nearing crisis levels.