British manufacturers enjoyed a strong rebound in order books in August after a recent hiccup and plan to raise production despite high oil prices and rising interest rates, a key survey showed today.
The report raised doubts as to whether UK interest rates - at 4.75 per cent - are as close to their peak as many economists had thought. Gilts markets fell on the view that the data added to the case for further interest rate hikes.
The Confederation of British Industry's monthly industrial trends survey showed 21 per cent of firms said total order books were above normal while 19 per cent said they were below.
The balance of +2 per cent was the highest since February 1998 and well above the balance of -7 in July. Economists had expected a slight rise to -5.
Factory bosses said they intended to increase output in the next three months, with the output expectations balance rising to +19 per cent from +6 per cent in the previous month.
"Overall, this is an upbeat survey, suggesting that some of the concern about the latest soft patch of data may be overdone," said Mr George Buckley, economist at Deutsche Bank in London.
Manufacturers' expectations for prices were stronger than at any time since January 1997, with a balance of +11 per cent of firms saying they expected average prices to increase over the next three months.
This compared with +6 per cent in July and -14 per cent in August last year.