UK manufacturers are "booming" according to the latest Markit PMI data for the sector (Reuters)
Britain's manufacturing sector saw output and new orders rise at their fastest rates in almost 20 years during August, in another sign that the ailing economy is finally on the mend.
The Markit Purchasing Managers Index (PMI) for overall activity in August rose to 57.2, up from July's 54.8 and the highest reading in two-and-a-half years. Any reading above the neutral 50 mark represents growth.
Markit also said that manufacturing output hit its highest growth rate since July 1994, while new orders rose for the sixth consecutive month and at the fastest pace since August 1994, suggesting production will remain robust in the near future.
"The UK's factories are booming again," said Rob Dobson, senior economist at survey compilers Markit. "Manufacturing is clearly making a strong positive contribution to the economy, providing welcome evidence that the long-awaited rebalancing of the economy towards manufacturing and exports is at last starting to take place now that our export markets are recovering."
Sasha Nugent, Caxton FX analyst, said the PMI data "adds to the mounting evidence that the UK economy is stabilising quite nicely".
"It also suggests the recovery is more balanced than we previously thought. The UK fundamentals seem to be on the right path," she said.
During the second quarter, the UK economy picked up the pace of its expansion with GDP growth of 0.7%, up from the first three months' 0.3%.
This growth appears to have picked up further still in the third quarter, with all three major sectors' PMI readings - services, manufacturing and construction - beating forecasts.
The Office for National Statistics (ONS) revised up its original estimate of GDP growth in the three months to June from 0.6% to 0.7% because of better-than-thought industrial output.
Both the Bank of England and International Monetary Fund (IMF) have lifted their forecast for UK GDP growth in 2013. The BoE is predicting around 1% expansion, while the IMF estimates 0.9%.
Meanwhile the British Chambers of Commerce (BCC), a business lobby group, predicts the UK economy will grow by 1.3% in 2013, up from its previous estimate of 0.9%.
In 2014, the BCC predicts 2.2%, up from 1.9%, and 2.5% in 2015, up from the past guess of 2.4%.
However, despite the upticks to its growth forecasts, the BCC warned that a recovery is not yet guaranteed.
"The improved outlook is testament to the steadfast determination shown by businesses in previous quarters, who have consistently displayed confidence in the face of unwarranted pessimism over the economy," said John Longworth, director general of the BCC.
"Unfortunately however the recovery is not yet secure. We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks."
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