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Friday, 1 March, 2002, 11:40 GMT
Manufacturing gloom lifts
Car production
The manufacturing sector is showing unexpected strength
The latest snapshot of the struggling UK manufacturing sector has indicated that it could finally be heading out of recession.


The survey suggests that maybe the imbalances in the economy are starting to fall back

Adam Chester, Halifax
The Chartered Institute of Purchasing & Supply (CIPS) survey recorded a jump in manufacturing activity to 50.1 last month, up from 46.5 in January.

A measure above 50 indicates expansion, and this is the first time the manufacturing sector has beaten the figure since February last year.

"It's really good news. Output has increased well up on the month, so have new orders and export orders," said Melinda Johnson at CIPS.

The main factor boosting output was a good performance by the consumer goods sector, reflecting the continued strength of High Street spending.

Rebalanced economy?

Despite signs of recovery, the survey still indicated that firms were still having to cut jobs.

The employment index slipped back to 44.6 from 44.7 in January.

But overall the survey's findings were much better than analysts' expectations.

"I'm very surprised by the strength of these figures," said Adam Chester at the Halifax bank.

"The survey suggests that maybe the imbalances in the economy are starting to fall back."

The manufacturing sector has been stuck in recession for many months, suffering from the impact of the global economic slowdown.

Companies have also complained that the high value of the pound against other currencies has affected overseas sales.

But within the UK economy, the recession in manufacturing has been offset by growth in the service sector and the ongoing strength of consumer spending.

North-South divide

If the UK's 'two-speed' economy is showing signs of converging it could help reduce the gap in economic prosperity between the north and south of Britain.

According to a study by Cambridge Econometrics, this North-South divide has risen sharply in recent years because of the contrasting fortunes in the manufacturing and service sectors.

"The divide between southern England and the rest of the country, which narrowed in the recession of the early 1990s... has opened further during recent years, " the report said.

While the UK as a whole grew by 17% between 1995-2001, there were big regional variations.

London, the south east, and east of England grew by an estimated 24%, reflecting the dominance of the service sector in these areas.

But over the same period, the north east of England grew by just 5%, Scotland by 9% and the north west and Wales by 11%.

See also:

01 Feb 02 | Business
Signs of hope for UK manufacturers
14 Jan 02 | Business
UK manufacturing slumps again
20 Dec 01 | Business
UK economy set to outperform
03 Jan 02 | Business
'Bumpier ride' ahead for UK economy
06 Aug 01 | Business
Q&A: The manufacturing recession
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