Manufacturing Output Rises In The U.K. For A second Month

Vehicle and factory production moves higher

June 10 (Bloomberg) — U.K. manufacturing rose for a second month in April as a rebound in motor vehicle production helped end the yearlong factory slump and temper Britain’s recession.

Output climbed 0.2 percent from March, when it increased by the same amount after being revised up from a drop, the Office for National Statistics said today in London. Economists predicted a 0.1 percent gain, according to the median of 26 forecasts in a Bloomberg News survey.

Bank of England Deputy Governor Paul Tucker said yesterday that confidence may be stabilizing, and other reports this month showed the housing market slump is moderating and service industries expanded for the first time in a year. This data suggests the recession may have slowed in the second quarter after the economy shrank the most since 1979.

“It’s encouraging that we’re seeing some improvement,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “I’m still cautious about reading too much into this, but at least there’s a sense we’re through the worst.”

The pound extended gains on speculation the economy is emerging from recession. The U.K. currency climbed to $1.6420 at 10 a.m. in London, from $1.6305 yesterday. It strengthened to 86.07 pence per euro, from 86.27 pence.

Six categories of factory production fell and seven rose on the month, the statistics office said. The biggest gain was in transport on higher production of cars and other motor vehicles, followed by chemicals and manmade fibers, and paper and publishing output.

Transport Equipment

Transport equipment production is still down by 22 percent from a year earlier, officials said.

Johnson Matthey Plc, the producer of a third of all autocatalysts, said June 4 that it expects operating profit and revenue to slide in the fiscal first half as car sales stagnate. U.K. aerospace manufacturers face some “tough” years ahead as the recession limits airline traffic and governments reduce defense spending, their main trade association said today.

Still, “we’ve seen indications that world trade is beginning to find a bottom,” Kounis said. “The export sector also has advantage of a significant improvement in competitiveness because of the drop in sterling. When world trade does start to improve, the U.K. is well placed to benefit.

Exports rose 0.6 percent on the month, while imports increased by 2.6 percent, the statistics office said today. The trade deficit widened to 7 billion pounds ($11.5 billion).

Housing Market

The U.K. housing market showed signs of “stabilizing” in May, the Royal Institution of Chartered Surveyors said yesterday. Markit’s services index, based on a survey of purchasing managers, rose to 51.7 in May, indicating expansion for the first time in a year. Nationwide Building Society’s consumer confidence index also climbed.

Tucker still said that it won’t be clear if the economy’s is improving for a few more months, “until the autumn.” The International Monetary Fund predicts the biggest U.K. contraction since World War II this year.

The Bank of England kept the benchmark interest rate at 0.5 percent last week and reiterated its plan to spend 125 billion pounds in newly printed money in U.K. debt markets to help the economy. The bank said this week it may widen the range of assets it’s buying to include secured commercial paper.