British industry's tentative revival moved up a gear in April to show the strongest growth for 17 months, leading to the first gain in jobs for more than a year, even though many manufacturers were still restructuring or pushing t hrough cost-cutting programmes.
These surprisingly bullish findings from the April survey by the Chartered Institute of Purchasing and Supply and the Royal Bank of Scotland were seen as strengthening the widespread expectation that the Bank of England will again leave its official interest rate unchanged tomorrow.
The headline Purchasing Managers' Index for manufacturing jumped to 54.1 last month from a seven-month low of 51.0 in March. For nine months running now it has been above the 50-mark which divides growth from decline.
For employment, the index was only marginally in positive territory at 50.7, but that was the first pick-up for more than a year and contrasted with index numbers of 48.2 in March and a depressed 46.5 as recently as January.
Sub-indices for output and orders both rose sharply from March to record their highest readings since November, 2004 and July 2004 respectively.
"The performance of the investment goods sector was especially robust in April, as anecdotal evidence suggested UK manufacturers had benefited from an increase in global manufacturing investment expenditure," the CIPS noted.
But it warned that the growth of export volumes was held back by the recent strength of the pound against both the dollar and the euro. Yesterday, sterling rose by a full cent against the dollar to $1.8374 and also went fractionally higher against the euro.
Output of consumer goods was also higher, thanks largely to stronger demand in the home market. There was no let-up, though, in industry's rising costs. Rising prices for oil and other sources of energy were the main factor, but the CIPS also noted reports of "increased costs for metals, plastics and packaging components".
Oil prices have now recovered the ground lost in a shake-out at the end of last week. Brent crude went another 45 cents a barrel higher yesterday after regaining more than $1 on Monday, to finish at $74.13, roughly in line with the usually higher price in New York.
Despite the high cost of raw materials, a number of manufacturing companies held back from raising the prices they charge their customers any further so as to remain competitive in export markets and offset the impact of unfavourable exchange rates.
They responded to quickening demand by stepping up their own buying activity, the CIPS said. The sub-index measuring purchasing volumes leaped to 57.6, higher than at any time since December, 1994.
