Britain's factories are “booming again” after output grew at its strongest pace for nearly two decades in August.
The new figures will further add to hopes that the UK is on track to achieve sustainable recovery and grow its once powerful industrial base – which remains well behind its pre-recession peak.
Activity rose to a reading of 57.2, its best level since February 2011, in the latest Markit/CIPS purchasing managers’ index (PMI). The 50 level separates growth from contraction.
Output rose at the fastest pace since July 1994 while new orders increased at their strongest pace since August 1994.
Rob Dobson, senior economist at survey compilers Markit, said: “The UK’s factories are booming again.”
He said rising demand from domestic customers was being accompanied by a return to growth of the eurozone, Britain’s largest trading partner.
Jobs increased for the fourth month running though this was described as muted as companies tried to squeeze more from existing resources. Manufacturers also faced having to absorb the soaring costs of oil and raw materials.
The improvement was the latest buoyant update on Britain’s economic progress, after revised gross domestic product figures showed it grew by a better-than-expected 0.7% in the second quarter.
Improvement in the manufacturing sector is especially welcome amid concerns that the economy needs to be re-balanced towards traditional industry.
But the accelerating growth has added to speculation that interest rates may have to be raised from their historic low of 0.5% sooner than 2016 – the figure suggested by the Bank of England’s forward guidance policy.
The new figures showed marked expansion in output across the consumer, intermediate and investment goods sectors. The domestic market was the main source of new contracts though there was a solid increase in overseas demand.
Companies said new product volumes, promotions and improved confidence had helped boost order volumes. Stronger demand was reported from the US, China, mainland Europe, India, Scandinavia, Brazil and Ireland.
However, input prices rose at their fastest rate for two years, with increases in the costs of commodities, feedstock, oil, paper, polymers and timber. Average selling prices also increased but at a much slower pace than costs.
David Noble, chief executive of the Chartered Institute of Purchasing and Supply, said: “The sharpest rise in input prices in two years is a pressing concern, and will be one to watch in the coming months as firms try to protect their profit margins.”
Samuel Tombs of Capital Economics said the figures pointed to a third-quarter growth in manufacturing of 2%, compared to 0.6% in the second quarter, though concerns remained that the recovery could lose some pace.
Howard Archer, chief European and UK economist at IHS Global Insight, said the “hugely encouraging” survey fuelled hopes that overall GDP in the third quarter could be higher than the 0.6% seen in the last period.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “We’re seeing a consistent and positive trend across UK manufacturing.’’