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U.K. manufacturing output in May recorded its biggest annual expansion in 15 years led by strong growth in machinery and equipment industries.
Manufacturing output growth accelerated to 4.3% annually in May from 3% in April, data released by the Office for National Statistics showed on Thursday. It was the strongest increase since December 1994. But, May's figure stood below the consensus forecast of 4.5%. Month-on-month, manufacturing output moved up 0.3% month-on-month, reversing a revised 0.8% drop in April. The monthly growth figure came in line with economists' forecast.
On a yearly basis, output increased in nine of the 13 sub-sectors and fell in four sub-sectors. The largest contributors to the rise were the machinery and equipment industries, which had a growth of 13.7%, while the output in the basic metals and metal products industries increased 9%.
While the recovery in the manufacturing sector continues, there are growing signs that the second quarter may be as good as it gets as far as the UK's economic recovery is concerned, commented Capital Economics economist Jonathan Loynes. The firm forecasts a quarterly rise of around 0.5% in the second quarter GDP.
Data showed that industrial production recorded a monthly growth of 0.7% in May, following a revised fall of 0.7% in April and bigger than the expected increase of 0.4%. Industrial production figures added to recent tentative evidence that the pace of economic recovery may have peaked in the second quarter, Jonathan Loynes at Capital Economics said.
Within in the total production, mining and quarrying output increased 2.5% with an increase in oil and gas production output of 2.5%. Energy supply output moved up 1.3% on the month, with increases in electricity, gas and water supply output, ONS said.
Annual growth in industrial production increased to 2.6% from April's revised 1%. The latest growth figure was smaller than the expected 3.1% rise.
In terms of GDP implication, Chiara Corsa, an economist at UniCredit Research said today's outcome suggests that a moderate upward trend in industrial production is in place so far in the second quarter. "We would have to see a significant drop in June production to derail this upward trend," the economist said. This, together with a likely improvement in services sector activity on stronger retail sector sales and a better construction output, underpins the view that GDP growth should accelerate in the second quarter, added Corsa.
Markit Economics on July 1 said manufacturing output rose for the 13th straight month in June, although the rate of expansion eased to a five month low. The CIPS manufacturing purchasing managers' index stood at a seasonally adjusted 57.5 in June, down from 58.0 in May. A reading above 50 indicates expansion.
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