Economic recovery could be gathering momentum

The UK’s economic recovery looks to be gathering some momentum – in the manufacturing sector at least. Official figures released today by the Office for National Statistics (ONS) show manufacturing output increased by 2.3 per cent in March.

This is the largest monthly increase in output since February 1987 (excluding July 2002 when the numbers were affected by the extra bank holiday in June 2002). Output was up 3.3 per cent compared to a year earlier.

Anecdotal and survey evidence suggests that a stronger export performance has boosted activity in the manufacturing sector. The latest CBI monthly industrial trends survey, for example, shows export orders at their highest level since August 2008.

When export growth disappointed in 2009, there were worries that companies’ reaction to the fall in sterling in 2008 had been to boost profit margins, rather than to seek increased market share. Perhaps, however, it was simply the weakness in demand overseas that was holding back UK exports.

Now that most economies are experiencing some sort of economic recovery, it appears that UK manufacturers are benefiting from their stronger competitive position.

However, the recovery is not just about exports. Detailed figures show that the biggest increases in output have been in the transport equipment industries. Despite fears that the Government’s car scrappage scheme would only benefit overseas producers, this would seem to be clear evidence that it helped UK manufacturers too.

As a result of these figures GDP growth in the first quarter is likely to be revised up from the initial estimate of 0.2 per cent, probably to 0.3 per cent.