UK manufacturing growth at two-year high, PMI survey shows

image captionDemand for UK-made goods has risen at home and abroad, Markit said

UK manufacturing saw its strongest growth in two years in June, according to a survey, boosting hopes of a strengthening economic recovery.

The Markit/CIPS purchasing managers' index (PMI) rose to 52.5 last month - its highest level since May 2011.

Any reading above 50 indicates growth in the sector.

The figure adds to the increasingly positive data released in recent weeks on the UK economy, which grew by 0.3% in the first three months of the year.

Other data suggests the services sector is showing signs of strength, and the construction sector - which has been a drag on growth - is stabilising.

Rob Dobson, senior economist at Markit, said he now expected GDP growth in the second quarter of about 0.5%.

"The near-term outlook for output also remains on the upside," he said.

Markit said that manufacturing production levels were reported to have risen at their fastest rate since April 2011, while new business increased at the fastest pace since February 2011.

May's PMI reading was also revised up to 51.5 from 51.3.

Encouraging trends

There was further positive news on Monday when Bank of England figures showed that mortgage approvals hit a three-and-a-half-year high in May.

The Bank said 58,242 home loans were approved in May, the highest number since December 2009.

Analysts said the upbeat data was welcome news for the new governor of the Bank of England, Mark Carney.

"As Mark Carney takes up his position these data flow confirm two trends that have been developing in the UK," said David Tinsley, UK economist at BNP Paribas.

"First the manufacturing sector looks to be in better shape. Second the housing market is picking up.

"For Mr Carney the question is whether the improvement in the activity data is strong enough and whether it will prove enduring."

One of Mr Carney's first tasks will be to chair this week's meeting of the Bank of England's Monetary Policy Committee.

Although many analysts expect him to push for more stimulus measures, no change to interest rates or the quantitative easing programme is expected this week.

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