UK manufacturing output grows at fastest rate in more than 5 years

British manufacturers ramped up production at the fastest annual rate since 1994 in August, but experts warned of tougher times ahead. The official figures come hours before the Bank of England announces its monetary policy decision at the end of its monthly meeting at noon. It is widely expected to leave both interest rates and its quantitative easing (QE) programme – pumping money into the economy – unchanged, although the City believes the chances of more QE have risen. The uncertain economic outlook means the committee is likely to be split over the direction of monetary policy. The Office for National Statistics said this morning that British manufacturing output rose by 0.3% in August, taking the annual rate of increase to 6% from 5% in July, the fastest rate of growth since December 1994. The food, drink and tobacco industries along with transport equipment put in strong monthly performances, while production in the paper, printing and publishing, textiles, and machinery and equipment sectors fell. The broader measure of industrial production, which also includes mining and utilities, showed a similar pattern. Output was up 0.3% on the month while the annual rate jumped to 4.2%, also the highest since 1994, from 2% in July. "While manufacturing output held up pretty well in August, it has nevertheless clearly lost momentum in recent months," said Howard Archer at IHS Global Insight. "Manufacturers benefited in the first half of 2010 from healthier demand both at home and overseas, improved competitiveness in both domestic and foreign markets stemming from the weak pound, and stocks rebuilding. Going forward, the concern is that manufacturing activity will be pressurised by tighter fiscal policy increasingly hitting domestic demand and slower global growth dampening foreign demand, as well as by stock rebuilding winding down."