LONDON (Bloomberg) -- UK factory production surged more than five times as much as economists forecast in March in the biggest jump since 2002 as the weakness of the pound stoked exports from cars to metals.
Manufacturing output rose 2.3 percent from February, the Office for National Statistics said today in London. Economists predicted a 0.4 percent increase, according to the median of 24 forecasts in a Bloomberg News survey. The result would be enough to prompt an upward revision to last month’s initial estimate of first quarter economic growth.
The data suggest the economy gained momentum before the onset of a post-election impasse and a sovereign debt crisis in the euro region, the U.K.’s biggest export market. The pound has dropped about 25 percent against a trade-weighted basket of currencies since the start of 2007, boosting export competitiveness. A UK manufacturing index rose to the highest in 15 1/2 years in April.
“It’s a sign that the devaluation of sterling is starting to bear fruit,” said James Knightley, an economist at ING Financial Markets in London. Still, “there’s a concern that we see aggressive fiscal tightening across the euro area and that will constrain growth and demand.”
The pound jumped as much as 0.2 percent after the data and traded at $1.4794, down 0.4 percent on the day, as of 10:49 CET.
Of the 13 categories in manufacturing, 12 increased, led by basic metals and metal products, and paper, printing and publishing. There was anecdotal evidence that the weakness of the pound aided exports of metals and cars, statistics office officials said. The index of manufacturing rose to 92, the most since November 2008.
London-based Tomkins Plc, a maker of auto parts and building materials, said May 6 greater-than-anticipated volumes drove improvement in its operating margin in the first quarter, though momentum in the second half “is uncertain.”
Overall industrial production, which includes utilities, mining and quarrying and accounts for 17 percent of the economy, jumped 2 percent on the month. It increased 1.2 percent in the first quarter, which would add 0.1 percentage point to the initial estimate that first quarter gross domestic product grew 0.2 percent, the statistics office said.
European Union officials agreed on a $1 trillion rescue package this week to stem a sovereign debt crisis that hammered the euro and government bonds. They also pledged a more rigorous enforcement of the bloc’s deficit rules. The EU may say tomorrow gross domestic product in the euro region expanded just 0.1 percent in the first quarter after it stalled in the fourth, according to the median of 31 forecasts in a Bloomberg survey.
In the U.K., the stalemate in the aftermath of the inconclusive May 6 election has extended into a fifth day as negotiators from the three main political parties struggled to form a coalition. Prime Minister Gordon Brown said yesterday that he will resign.
Bank of England Governor Mervyn King will present quarterly growth and inflation forecasts tomorrow amid signs higher oil costs are causing price pressures in the economy to accelerate. Crude oil futures have risen 31 percent in the past year, and U.K. producer prices increased 1.4 percent last month, the most since May 2008.