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August 4, 2009

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Home » Business » Manufacturing

UK purchasing index rises unexpectedly

FIGURES showing the first uptick in Britain's manufacturing sector in over a year sent the pound surging to a near 10-month high against the US dollar yesterday.

The closely watched purchasing managers' index from the Chartered Institute of Purchasing and Supply jumped to 50.8 in July from 47.4 in June, largely as a result of a sharp pick-up in new orders.

That was the highest reading since March 2008 and indicates that the sector, which accounts for around 15 percent of the British economy, is growing again. Any reading above 50 points to an expansion in activity. As recently as November, the index had fallen to a record low of 34.9.

The rise above 50 was unexpected - analysts were anticipating a more modest rise to around 48.

Economists said the data may fuel hopes that the British economy will grow in the third quarter.

Recent figures showed that the British economy contracted by 0.8 percent in the second quarter of the year from the previous three month period. Though a marked improvement on the 2.4 percent drop recorded in the first quarter, it was much worse than expected.

"While over reading any one piece of data is dangerous, it is notable that the manufacturing PMI index has moved into positive territory for the first time since the economy entered recession - bolstering hopes for growth in the third quarter of 2009 for the first time since the first quarter of 2008," said Charles Davis, an economist at the Center for Economic and Business Research.

Following the data, the pound spiked to US$1.6879, its highest level since October 21.

It also struck a one-month high against the euro, which is now trading below 85 pence (US$1.43) for the first time in over a month.

This despite equivalent figures for the 16 countries that use the single European currency also painting an improving manufacturing picture.


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