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UK industry grows unexpectedly fast

Industrial production and manufacturing output both grew faster than analysts expected in May, official figures show.

The Office for National Statistics (ONS) said industrial output rose 0.6% in May from April, which is its fastest growth since November 2006. Manufacturing output was also up, growing 0.4% on the month. The ONS said the recovery was helped by the completion of major shipbuilding work and rising output from the Buzzard oil field in the North Sea.

Market hawks
It is the first time that manufacturing output has grown for three consecutive months since March to May 2004. “The general picture is that the economy is growing strongly,” said Michael Saunders of Citigroup. Analysts said the figures might help bolster arguments for an interest rate rise in coming months. The Bank of England lifted its main interest rate by a quarter of percentage point to 5.75% on Thursday, the fifth increase since August 2006.

Some observers are predicting that rates will hit 6% by the end of this year, as the economy continues to grow at a steady pace and the rate of inflation takes time to decline. “This release is unlikely to dissuade market hawks from looking for an additional tightening in policy before year-end,” said Daragh Maher, an economist at Calyon. (