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UK industry keeps growing

Britain's long-suffering manufacturing sector is enjoying its best period of output for eight years, with official figures today showing that the strength of the world economy is helping firms in spite of the strong pound. 

The Office for National Statistics said manufacturing output, which accounts for 15% of the economy, rose 0.2% in June from May, the fourth monthly increase in a row. That last happened in mid-1999.

The three-month rate of increase rose to 0.7%, the highest since August last year, while output in June was 0.9% higher than May 2006.  

The wider measure of industrial output rose by 0.1% on the month, in line with City forecasts, to give an annual rate of increase of 0.8%.

On a three month basis, output was up 0.6%, the fastest since March 2006 and in line with the published estimate of second quarter economic growth.

The gains came despite a 1.3% fall in oil and gas extraction in June as several smaller oil fields started maintenance work early and gas production returned to more normal levels after an exceptionally strong May.

"Manufacturing output achieved solid growth for a fourth month running in June, thereby demonstrating encouraging ongoing resilience in the face of the strong pound, higher interest rates and elevated oil prices," said Howard Archer, economist at Global Insight.

Jonathan Loynes of Capital Economics said the strong figures were in line with recent surveys of the sector and would certainly not prevent the Bank of England monetary policy committee raising interest rates again from their current 5.75%.

"But we have pointed out before that it usually takes about a year before higher interest rates start to affect industry.

Accordingly, it is unlikely to be long before manufacturing output starts to slow," he said.

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