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October 7, 2010    

UK manufacturing output continues recovery in August

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by Kay Murchie

The Office for National Statistics (ONS) has today revealed UK manufacturing output grew by 0.3% in August compared with July - the highest gain since November 2008.

Not only was this better than the 0.2% rise expected by analysts, it follows the revised 0.4% gain in July.

Out of 13 categories of manufacturing, nine grew and four declined, with positive contributions from food, drink and tobacco, and transport and equipment, said the ONS.

Paper, printing and publishing saw the largest drop.

Meanwhile, total industrial production, which also includes utilities, mining and quarrying, rose 0.3% on a monthly basis.

However, Philip Shaw, an economist at Investec Securities in London, cautioned that a slowdown may be seen in the coming months.

The pound gained on the news to $1.5935 this morning, against $1.5890 yesterday.

The figures come as the Bank of England enter their second and final day of the interest-rate setting meeting.

The Monetary Policy Committee (MPC) is expected to keep UK interest rates on hold at the historically low level of 0.5%.

However, in terms of quantitative easing programme (QE), Bank of England policymakers, Adam Posen and Martin Weale, have recently suggested injecting more cash into the economy, via the QE scheme.

According to Posen, more stimulus is required to help the recovery and to avoid a similar kind of slump which Japan experienced in the 1990s.

QE, also known as printing money, is a process whereby the Treasury injects funds into the financial system to ease pressure on banks by giving them extra capital.

The Bank embarked on its £200 billion QE programme in March 2009, when the economy was in the midst of its worst recession in more than five decades.

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