Industrial production has risen at its fastest pace in nearly a decade as exporters continue to benefit from a weak pound.
Confounding initial estimates of weak growth, industrial production rose 2% in March, according to the Office for National Statistics. It represents the strongest performance since the summer of 2002 and comfortably outstrips economists’ forecasts of 0.3% growth.
The boost builds on the month-on-month rise between January and February, with production disrupted at the start of the year by heavy snow.
The better than expected results are expected to add 0.1% to GDP growth in the first quarter.
The trend appears to have applied broadly to most subsectors as manufacturers continue to capitalise on the weak pound and a strengthening of global growth. However, the ongoing financial crisis in an important trading partner, the Eurozone, could yet hamper the recovery.
Industry has a lot of ground to make up after the extraordinarily deep recession in the sector – production is still down by over 10 per cent from its peak back in 2007
Jonathan Loynes, Capital Economics
Lee Hopley, chief economist at the Engineering Employers' Federation, says that while the data was great news, there was no room for complacency.
"Whilst manufacturing and exports are now providing the foundations for a sustained recovery and a better balanced economy, we can't take this for granted," he says. "A stable government with a credible plan to repair the public finances is needed both to reassure financial markets and underpin a sustainable recovery."
Jonathan Loynes of Capital Economics pointed out that though the recovery was gathering pace, "industry has a lot of ground to make up after the extraordinarily deep recession in the sector – production is still down by over 10 per cent from its peak back in 2007. It is far from clear that even continued rapid growth in industry can drive a strong recovery in the overall economy."
Increased optimism in the sector is also being tempered by fears over Conservative plans to fund cuts in business rates and corporation tax by axing tax reliefs and allowances. However, the Conservatives backtracked during the election campaign, with David Cameron saying that some, but not all, allowances would be withdrawn.
