British industrial output surged more than six times as fast as expected in March to record its strongest monthly expansion in almost eight years, official data showed on Tuesday.
Industrial output rose 2.0 percent on the month in March, its fastest monthly pace since July 2002. On the year, output also rose 2.0 percent, the fastest rate since March 2004.
The Office for National Statistics said the data would add 0.1 percentage points to Q1 GDP growth, which was initially estimated at 0.2 percent.
The pound, which has come under pressure from political uncertainty in Britain following an inconclusive election result, climbed a fifth of a cent against both the dollar and the euro as investors cheered signs that economic recovery was gaining traction.
"This is a really spectacular performance by the manufacturing sector, which is a real shot in the arm for the economy," said Howard Archer, economist at IHS Global Insight.
"Manufacturers are currently clearly benefiting from a pick-up in demand both at home and, particularly, overseas, improved competitiveness in both domestic and foreign markets stemming from the weak pound and leaner stock levels."
UK markets had taken a knock after Prime Minister Gordon Brown said late on Monday he would step aside to entice the Liberal Democrats into a pact with his Labour Party.
Investors had hoped that formal talks between the Conservatives — who won most seats at last week's election but fell short of an overall majority — and the smaller LibDems would rapidly lead to a stable government committed to making an early start on cutting Britain's record budget deficit.
The ONS said there were signs that export demand had contributed to the strong performance in manufacturing, particularly in the transport and metals sectors.
Policymakers have been hoping the weakness of the pound would give a boost to Britain's economy, which is emerging from its deepest recession since World War Two.
The narrower measure of manufacturing output rose 2.3 percent on the month, also its fastest monthly rate since July 2002, taking the annual rate to 3.3 percent, its highest since October 2006.
Analysts had expected a rise in industrial output of 0.3 percent on the month, with manufacturing output seen up 0.4 percent.
Growth was strong across the board with 12 of the 13 manufacturing subsectors recording growth on the month. There were also strong rises in mining and oil and gas extraction.
Overnight, the Royal Institution of Chartered Surveyors' reported its house price balance rose more than expected to +17 from +9 in April [nAHLAGE61I] but the British Retail Consortium said retail sales suffered their biggest fall since December 2008, due partly to timing of Easter holidays
