Britain’s factories enjoyed a welcome bounce-back in July thanks to the strongest surge in export orders for more than seven years.
The closely watched Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) showed a reading of 55.1 last month, up from 54.2 in June and higher than expected.
A reading above 50 indicates growth.
The pound jumped to a fresh 10-month high against the US dollar after the report, which said foreign demand for UK manufacturing output rose at the fastest pace since April 2010.
It was also the second-strongest rate in the history of the survey as the Brexit-hit pound has boosted overseas demand for British-made goods and services.
Sterling lifted 0.2% to 1.32 US dollars and 0.4% to 1.12 euros.
The reading marked the first pick-up in growth for three months and offered some cheer for the wider economy.
Rob Dobson, director at report compiler IHS Markit, said the manufacturing sector had kicked off the third quarter on a “solid footing”.
He said: “Although the exchange rate remains a key driver of export growth, manufacturers also benefited from stronger economic growth in key markets in the euro area, North America and Asia-Pacific regions.
“Continued expansion is also still filtering through to the labour market, with the latest round of manufacturing job creation among the best seen over the past three years. ”
The report also said pricing pressures eased further for manufacturers, with input prices rising at their weakest pace in over a year.
This gives hope that soaring UK inflation may begin to wane, relieving pressure on cash-strapped consumers.
It comes ahead of the Bank of England’s interest rates decision on Thursday, with speculation over whether policymakers will vote for a rise to offset surging inflation.
Mr Dobson said: “If this trend of milder price pressures is also reflected in other areas of the UK economy, this should provide the Bank of England sufficient leeway to maintain its current supportive stance until the medium-term outlook for economic growth becomes less uncertain.”
But economists warned the solid manufacturing figures would not be enough to spur on wider UK growth.
Export orders grew at fastest rate since April 2010, says Markit. Brings some hope net trade will finally start to boost GDP in c.6m time: pic.twitter.com/oaYXGatWcY— Samuel Tombs (@samueltombs) August 1, 2017
The UK economy struggled to gather pace following a lacklustre start to the year, with growth ticking up to 0.3% in the second quarter from 0.2% in the first three months.
Samuel Tombs at Pantheon Macroeconomics said: “Markit’s survey remains consistent with only modest growth in manufacturing output that will provide insufficient compensation for the slowdown in the consumer sectors of the economy.”
James Smith, an economist at ING, added: “Wider economic data, from the weak second-quarter growth reading to the latest dip in consumer confidence, suggests that the economy is losing speed.
“For that reason, we think the Bank of England is unlikely to hike rates this year.”