But, as usual when figures confound forecasts, MT advises caution. July’s industrial fillip must be taken in context: the UK is making up much of the ground lost in June, after the additional public holiday for the Queen's Jubilee and delayed May bank holiday squashed output.
However, even if you use three-month growth rates, which help to level out some of the volatility in the monthly data, industrial production still rose 0.1% in the three months to July. This is cause for celebration: it’s the first quarterly increase seen since February 2011. Manufacturing too holds up to the three-month measure, rising 0.2% across the quarter, the largest quarterly increase for a year.
These industrial output figures, combined with the August PMI data, suggest that the UK could be about to shake off its recessionary gloom and return to growth proper in the third quarter. The European Central Bank's bond buying programme, which could give some respite to the beleaguered eurozone nations, adds to the general mood of positivity.
But the UK mustn’t count its chickens quite yet. July’s industrial data is still down 0.8% on last year’s output, with a 0.5% shortfall for manufacturing year-on-year. Growth is by no means guaranteed and will probably be weak at best. Take the latest Producer Prices Index figures from the ONS. Higher oil prices drove up the cost of firms' raw materials by 2% in August, pushing annual input price inflation up to 1.4%, having fallen 2.4% in July – that puts serious pressure on companies’ bottom lines. Output price inflation, which measures the cost of finished goods leaving factories, rose to 2.2% in August - a three-month high.
It’s fair to say that it will take a substantial upturn across all industries in the UK to get Britain going again. If the UK wants to finish 2012 in better economic health than in 2011, we’re going to have to work for it.