UK manufacturing hits two-year high

The UK’s manufacturing sector saw an increase in production above expectations last month which could see second-quarter economic growth hit 0.5 per cent, according to data from Markit.

The financial data company said the UK’s factory purchasing managers’ index (PMI) rose from 51.5 in May to 52.5 in June, indicating an increase in demand. According to Bloomberg, economists had originally forecast a slight dip to 51.4. Any figure above 50 indicates an expansion in production.

Rob Dobson, senior economist at Markit, said the data may mean the Bank of England’s monetary policy committee again opts against adding more quantitative easing.

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“Taken with recent signs of service sector strength and a stabilising construction industry [this data] paints a picture of UK economic growth picking up from the opening quarter’s 0.3 per cent to at least 0.5 per cent,” he said.

“Job creation is still weaker than hoped for, but this should improve if solid demand growth is sustained and eats into spare capacity.”

The FTSE 100 was broadly flat in early trading as the positive news from the UK’s manufacturing sector was dampened by data from the eurozone and China. Both regions saw their manufacturing PMI contract, potentially dragging down quarterly economic growth.

HSBC’s manufacturing PMI data for China registered 48.2 for June, worse than May’s figure of 49.2 and a further indicator that the growth of the Chinese economy is slowing.

In the eurozone, Markit’s data showed another month of contraction in the currency bloc’s manufacturing sector, albeit less than was forecast.