Sterling gained on the news that the seasonally adjusted Markit/CIPS Purchasing Manager’s IndexÂ® (PMIÂ®) rose to a 28-month high of 54.6 in July.
The main driver was 'strong and accelerated growth of output and new orders in the consumer goods sector'.
The index has now remained above the neutral 50 mark since April this year and has improved a little every month with growth rates for production and new orders at their highest since February 2011.
The rate of job growth in manufacturing is also at a two year high rising for the third month in a row.
Rob Dobson, Senior Economist at survey compilers Markit said:
“Today’s data provide positive news across the growth, prices and jobs fronts, as manufacturing output and new orders expanded at the fastest rates since February 2011, price pressures remained relatively subdued and the pace of payroll expansion hit a two-year high."
David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply said:
“The much vaunted march of the makers has finally materialised with the UK manufacturing sector’s output growth hitting a 29-month high in July. Exports have been critical to this success, but it is the broad based nature of the sector’s performance which endorses the view we are on track for solid and accelerated growth in the coming months."
Nida Ali, economic advisor to the EY ITEM Club, commented:
“An excellent start to the third quarter, with the manufacturing PMI rising to a two-year high. It’s good news across the board, but the robust increase in new order books both at home and abroad is particularly encouraging. This gives us confidence that the UK's recovery is not just a flash in the pan, but actually has some underlying momentum. After a strong performance in Q2, we expect growth of 0.4% in each of the subsequent quarters resulting in full-year growth of 1.1% in 2013.
“Although the consumer sector is the main contributor to increased demand, there are also initial signs of a stabilisation in the Eurozone – the UK's main trading partner. Exports have been a major source of weakness in the manufacturing sector so far, so higher demand in the Eurozone is very welcome.
“Manufacturing output increased by 0.4% in the second quarter and these figures suggest that the pace of growth will accelerate further in Q3. However, having said that, the manufacturing sector has taken a real battering during the crisis, so there is still a long way to go before pre-crisis levels are restored.”