UK manufacturing activity rose in June at its fastest rate in more than two years, according to data released on Monday.
The Purchasing Managers’ Index (PMI) for the British manufacturing sector climbed to 52.5 from a revised 51.2 in May, the highest level since May 2011.
A level above 50 signals expansion, signalling growth in Britain’s economy ahead of Mark Carney’s first policy meeting as the new Governor of the Bank of England on Thursday.
Manufacturers experienced solid demand from Europe, China, North America, Scandinavia and the Middle East. An upturn in manufacturing led to increased levels of purchasing activity, as companies acted to reduce the pressure on input stocks and meet rising production needs.
Average factory gate prices fell for the first time in three-and-a-half years, mainly due to strong competition.
The near-term outlook for output also remains on the upside, as above-trend sales growth depleted inventories that manufacturers will need to rebuild later in the year. Taken with recent signs of service sector strength and a stabilising construction industry it paints a picture of UK economic growth picking up from the opening quarter.
It therefore seems increasingly unlikely that the Bank of England’s policymakers will opt for further asset purchases at its meeting this week.
Although encouraging, it is believed that more QE will eventually occur, with a £25bn dosage possible in August reflecting the belief that Mark Carney is likely to be keen to build up “escape velocity” from extended economic weakness.
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