U.K. Manufacturing Output Surges the Most in Nearly Four Years

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Online Currency Trading Fundamental Analysis - May 15, 2014

U.K. Manufacturing Output Surges the Most in Nearly Four YearsU.K. manufacturing output expanded its most in almost four years in the first three months of the year, while trade gap shrunk, as the economy looks to rebalance.

Factory output rose by 1.4 percent in the first quarter, up from fourth quarter’s growth rate of 0.6 percent, reported the Office for National Statistics on Friday. This is the strongest growth since the April-June quarter of 2010.

UK’s trade gap with the rest of the world also shrunk more than analysts had forecasted, narrowing to 8.478 billion pounds ($14.37 billion), the smallest since December last year.

“UK trade and manufacturing numbers offer more support to those looking for earlier Bank of England rate hikes and stronger sterling,” James Knightley, an economist at ING, told Reuters.”All in all these reports are consistent with the UK economy gaining momentum,” he added.

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A leading British research firm NIESR revised upwards its estimate of economic growth this year from 2.5 percent to 2.9 percent. UK bonds and the sterling remained slightly unchanged despite the report since industrial and factory output only grew marginally higher than expected. Factory output expanded by 0.5 percent from 1 percent growth in February, while industrial output fell 0.1 percent in March after surging 0.8 percent in February.

While most analysts predict that the Bank of England may hike interest rates in the first quarter of 2015 from the current record-low of 0.5 percent, the central bank has insisted it will wait until the spare capacity in the economy is utilized before it does so. It also wants economic recovery to be propelled more by business investment and higher exports as opposed to household spending.

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To contact the reporter of this story; Jonathan Millet at john@forexminute.com