UK factories at 14-month peak as orders surge

GROWTH is now returning to the manufacturing sector, with a healthy 1.1-point increase in Markit’s purchasing managers’ index (PMI) for the industry this May.

April’s figure, which had initially indicated no improvement or decline, was revised upward slightly yesterday too – to 50.2.

May’s reading of 51.3 was the highest seen since March 2012, with the ratio of new orders to finished goods at the highest level for 25 months, indicating that output may continue to improve in the months ahead.

Anything above 50 shows growth. Increased orders were particularly notable in the release, rising to their highest point in two years. While export orders increased, most of this growth came from rising demand in the UK itself.

Improvements were also spread across the board, with consumer, investment and intermediate goods all joining in the upswing. For the first time in four months, the sector recorded rising employment.

Manufacturing has struggled since 2011, when output began to decline.

Last week Charles Bean, one of the Bank of England’s deputy governors, suggested that the fall in the value of the pound since the financial crisis had failed to boost manufacturing.

With weak demand continuing in the European countries which the UK typically exports to, the figure signals an improvement from a relatively weak position.

The upturn also reflects the rosy outlook of manufacturers, who have retained a level of optimism. Earlier in May, the CBI’s survey of 404 firms showed expectations for strong growth in output over the summer.

Nida Ali, economic adviser to the Ernst & Young Item Club, said: “the manufacturing sector looks on course to contribute positively to growth in the second quarter”, adding, “it also supports our view that a sustained recovery is beginning to take hold in the UK”.