Growth in manufacturing activity hits 15-year high

Strong demand from abroad continued to bolster the manufacturing sector's recovery last month, according to a closely watched survey which showed the fastest pace of factory activity growth in more than 15 years. The headline reading on the Markit/Chartered Institute of Purchasing and Supply survey of purchasing managers hit 58, which was ahead of analysts' consensus forecasts of 57.4 in a Reuters poll and the highest since September 1994. The index has been above the 50-mark separating growth from contraction since July last year. The data will provide a boost to Labour as its candidates enter the final hours of election campaigning and seek to highlight the party's measures to haul the UK out of recession. However, separate data on lending this morning painted a picture of a slowing housing market and more worries to come for consumers. The manufacturing survey suggested much of the boost to the sector – which has been hard hit by the recession – came from overseas. With the pound still weak against other major currencies last month, new export orders rose at the fastest pace since records began in 1996. But there were also signs of a broader improvement for the sector, with the overall new orders index at its highest in more than six years and the employment index at its strongest in three years. Manufacturers' raw material and energy costs continued to rise with the input price index at the highest since the summer of 2008 but they now seem to be passing some of that on, with the output prices index the highest in 18 months. Some economists said the improvement in manufacturing – which makes up just over 13% of the nation's GDP – underlined a wider economic pick-up. "The data point to manufacturing output growing by as much as 2% in the latest three months, suggesting the sector will provide a strong contribution to second-quarter gross domestic product," said Rob Dobson, senior economist at survey compilers Markit. "The sheer strength of the rebound in demand for manufactured goods is highlighted by an unprecedented increase in backlogs of work, the largest for at least 11 years, which in turn has encouraged manufacturers to raise staffing levels to the greatest extent for three years. The feeding-though of rapid output growth to job creation is particularly good news, and bodes well for the sustainability of the UK economic recovery." But separate data out this morning on the housing market was not so upbeat , with a sharp slowdown in mortgage lending reported by the Bank of England. Net mortgage lending rose by just £318m in March, compared with economists' forecasts of a £1.6bn rise. "The UK's industrial recovery still seems to be picking up pace, but housing market activity is struggling to regain momentum after faltering at the start of the year," said Vicky Redwood, senior UK economist at Capital Economics. "Although the [manufacturing] survey has recently been a bit more optimistic than the official data, it clearly suggests that the recovery remains on track. However, the same can't be said for the housing market. The number of mortgage approvals for new house purchase rose by 2,000 to 49,000 in March, but remained significantly below the 60,000 level reached at the end of last year. Clearly this casts doubt over the sustainability of the recent pick-up in house prices."