Britain’s industrial sector bounced back to growth in March, helped by a resurgence in oil and gas production and strong manufacturing output.
The healthy figures will cheer the government after a run of lacklustre data showed the economy slowing sharply in the first three months of the year.
Investors pushed the pound higher, but the stock market reeled at the news, sending the FTSE 100 tumbling by more than 140 points, or 2%. Analysts explained that the better-than-expected industrial figures would put pressure on the Bank of England to bring forward its first base-rate rise – possibly to later this year rather than 2016.
The likelihood of higher interest rates is likely to suck investors away from equity markets in favour of bond markets, which have offered poor returns in recent years while interest rates have remained low.
The Bank’s governor, Mark Carney, is expected to warn investors at the presentation of his quarterly inflation report that the economy remains strong and it would be complacent to rule out an earlier rate rise.
Howard Archer, chief economist at IHS Global Insight, said: “Now that the general election is out of the way and political uncertainty is less of a factor, the prospects for manufacturers seem pretty healthy on the domestic demand front, especially for consumer goods.
“Meanwhile, the underlying fundamentals for business investment still seem decent overall, which will hopefully support demand for capital goods, especially now that the risk of political uncertainty and instability has essentially disappeared for the time being following the Conservative’s gaining of a majority in the general election.”
via The Guardian