Financial News

  • 2 June 2014, 20:57

Manufacturing Sector Gets Boost In May

The UK manufacturing sector has recorded one of its best months of growth in more than two decades, an industry survey has said.

The CIPS/Markit purchasing managers' index (PMI) May survey was recorded at 57 - with 50 being the marker point between growth from contraction.

The figure last month almost reached April's five-month high of 57.3.

It has helped sustain one of manufacturing's best output and new order periods in the survey's 22-year history.

According to Markit, production has expanded at a quarterly rate close to 1.5%, however the sector remains around 7.5% smaller than before the bank-led financial crisis.

Markit said at the current rate of growth a full recovery to pre-crash would be achieved at the end of next year.

It said green shoots of recovery are being seen in both small and large firms, with good demand for both machinery and plant.

Exporters have also recorded good order books, and the results come as employment witnessed a 13-month period of sustained expansion.

Manufacturing trade body EEF's deputy chief economist Neil Prothero said five quarters of growth are expected, for the strongest performance in four years.

Mr Prothero said: "Despite the headline number edging marginally, lower manufacturing remains in strongly positive territory and well above the index long-term average, underlining the important role being played by industry in the UK's continuing recovery.

"Signs of a pick-up in export orders are especially welcome, as the broader rebalancing story still requires a significant boost in net trade to support the recent rebound in business investment."

Although the manufacturing sector is only a small part of the UK economy, Markit economist Rob Dobson believes more focus will now move onto the Bank of England.

The 0.5% base rate has been at its historic low for the past five years.

Mr Dobson said: "As manufacturing only makes up a small share of the UK economy, around 10%, these positive data are unlikely to shift the Bank of England's monetary policy committee on to the path of normalising monetary policy on their own.

"The first piece of that puzzle nonetheless seems to be in place and, if accompanied by further surging growth elsewhere in the economy, the clearer picture unfolding could raise the stakes for an earlier-than-expected step in that direction."

Advertisement