LONDON, Sept 24 (Reuters) - Car production in Britain surged by 28.7 percent on a seasonally-adjusted basis in August, giving hope to manufacturers who have been in the doldrums for much of the past year, official data showed on Tuesday.
Economists said the stronger than expected rise, which could have been partly due to distortions caused by the Golden Jubilee celebrations earlier in the summer, contradicted a recent raft of data showing a fast slowing economy.
"There is certainly little here to suggest that domestic conditions are softening," said Danny Gabay, economist at JP Morgan.
It also provided some much-needed cause for optimism on a day in which stocks fell to fresh six-year lows on fears of war with Iraq and growth worries.
Within the breakdown, the Office for National Statistics said production for exports rose by 24.4 percent and for the domestic market by 27.9 percent.
Moreover, car production in the previous two months were revised up by three percentage points.
"This data shows that the UK is benefiting from the strong U.S. demand for cars and again clearly supports our view that sterling is not over-valued," said John Butler, economist at HSBC.
"Also, it clearly shows that while June saw a slump in domestic demand, demand has subsequently bounced back with a vengeance," he added.
The Jubilee celebrations of Queen Elizabeth may have caused factories to bring forward the usual holiday period in August to June.
But August's surge could contribute as much as 2.8 percentage points to industrial production, economists said.
"That implies a very strong start to third-quarter production, and could and could also mean that third-quarter consumption is running above the 4.8 percent pace recorded in the second-quarter, assuming production is met by demand," added JP Morgan's Gabay.