UK Manufacturers Optimistic About Economy

LONDON (AP) -- U.K. manufacturers are increasingly optimistic about the eventual recovery of the British economy, still mired in recession, a survey showed Monday.

October's Purchasing Managers Index for the manufacturing sector stood at 53.7, marking the first time since November 2007 there were more respondents seeing an improvement in business than a decline. Any figure above 50.0 indicates a net increase in activity.

New orders hit a 69-month peak, though the Chartered Institute of Purchasing & Supply said that was measured against weak comparables.

"The problem is that correlations between CIPS survey results and official data have not been as close in recent months as in prior periods," commented Stephen Lewis at Monument Securities.

Lewis noted, for example, that the CIPS survey of the service industries pointed to gains in the third quarter, but the official figures showed a drop of 0.2 percent.

David Noble, the Institute's chief executive, said it was encouraging that Monday's manufacturing report showed that "clients are starting to restock inventories, which is encouraging them to restart production lines."

"This is important as it suggests the growth may be sustainable rather than a short term blip," Noble said.

Rob Dobson, senior economist at Markit Economics, which gathered the survey data, also urged caution.

"Job losses are still running at a fast rate and cost pressures are starting to re-emerge," Dobson said.

"Official data show that manufacturing employment is at its lowest level since comparable records began and output is at its mid-1992 level," Dobson said, adding that the road to recovery "is likely to be long and uncertain."

Britain's economy shrank by 0.4 percent in the third quarter, according to the preliminary calculation by the Office for National Statistics, confounding widespread expectations that the economy might return to growth during the period.