Industry climbing out of slump

FURTHER signs of a rebound in Britain's economy emerged today as official data suggested the embattled manufacturing sector was at last coming out of a year-long recession.

Manufacturing output rose 0.4% in February, a first rise since last August and beating City expectations of a 0.1% lift. The increase reduced the year-on-year decline in manufacturing output to 5.8% from a revised 6.2% annual fall in January.

Output for the three months to end-February was 6.2% below last year's level, the biggest slump in more than a decade.

But economists said February's rise in factory output suggested manufacturers were over the worst and reflected signs that a fledgling recovery in the world economy was gathering speed.

But they warned a stronger rebound in coming months would pressure the Bank of England into lifting interest rates from a 38-year low of 4%.

'This suggests we may have touched the lowest point in the cycle. I think what is driving the February rise is a recovery in the world economy and some reversal of the running down of stocks worldwide.' said David Smith, chief economist at Williams de Broë.

But there was more bad news for technology-related manufacturers with a sharp decline in output in engineering, machinery and optical equipment.

Data from Germany today also suggested an accelerating global recovery with unemployment there falling for the first time since December 2000. It was down 8,000 in March to an adjusted 3.97 million.