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UK manufacturing moves up along with house prices

UK manufacturing moves up along with house prices

The latest release suggests that UK manufacturing is on course to return to modest growth in Q2. Industrial output rose for the third consecutive month in April, up by 0.1% on the month after a 0.7% increase in the previous month, underlying a slow but steady recovery in the sector.

Manufacturing output, a narrower measure which excludes energy production, shrank by 0.2% in April, better than market expectations of a 0.3% decline. Despite this small decline, improved PMI and other survey data suggests activity should return to expansion in Q2 following a long period of contraction.

The run of UK positive data continued as a leading house price index rose to a three year high in May as the government’s credit easing programmes revived buyer interest. The RICS index rose to +5 in May, up from +1 in the previous month where a positive reading means more respondents to the survey saw prices rising rather than falling. New buyer enquiries and newly agreed sales have returned to levels last seen in 2009 driven by government efforts to expand the availability of credit.

On the FX markets, GBP/USD continues to gain momentum pushing above the $1.5650 level ahead of this morning’s key labour market report. Sentiment was broadly risk-off yesterday with investors selling US dollar positions creating very choppy price action, particularly in Asia overnight. EUR/USD broke through the $1.33 level and has held on to these gains in London trading early this morning.

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