Move into positive provides boost for sector

MANUFACTURING activity in the UK grew at its fastest pace in 14 months in May, a key economic indicator showed yesterday, prompting hopes that the sector may finally be emerging from recession.

A headline reading of 51.3 for May in the latest Markit/CIPS purchasing managers’ index was above the 50 level which separates growth from contraction and ahead of market expectations for a rise to 50.3. April’s figure was revised up from 49.8 to 50.2.

There was also a return to job creation in May for the first time in four months, with companies reporting that a recent upturn in production had led to new hirings.

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Rob Dobson, senior economist at survey compilers Markit, said: “The UK manufacturing sector had a spring in its step in May, as a brightening domestic market led to faster growth of output and new orders.

“One of the more positive features of the expansion is its broad base, with producers of consumer, intermediate and investment goods all reporting stronger output growth. The tentative return to job creation in the sector in May also suggests that manufacturers are becoming more confident in the outlook.”

Martin Boyle, partner at executive search firm Howgate Sable, which has offices in Leeds and Sheffield, told the Yorkshire Post that this year UK manufacturing has accounted for 38 per cent of its total fee income of just over £3.7m.

He said: “The figure has been based across a broad range of companies and seems to indicate a general upturn in the sector.”

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Yorkshire Bank economist Tom Vosa said: “Not only was the May outturn better than expected, but April data were revised up from a 49.8 reading to 50.2, which means that manufacturing output has expanded for two consecutive months for the first time since December 2012/January 2013.”

He said that higher new orders implies that the sector may see another above-50 reading in June.

The UK economy grew 0.3 per cent in the first quarter of 2013, avoiding a triple-dip recession. The Bank of England has since upgraded growth prospects and there has also been optimism from business groups. However the Organisation for Economic Cooperation and Development marked down its UK forecast last week.

Improvements in headline gross domestic product (GDP) have been undercut by the fact that sectors including manufacturing have continued to struggle at well below their pre-recession peak, and acted as a drag on the headline figure.

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But yesterday’s data indicate that it may at last be entering a sustained period of recovery and produce a positive second quarter when the next tranche of official data is published next month.

They showed the growth of both production and new orders accelerating. While the domestic market was the main driver, export business also saw a modest increase, including higher demand from North America, East Asia, Russia, Germany and France.

Meanwhile, eurozone manufacturing contracted again last month, although at a slightly slower pace, while Asian factories lost momentum. “The global economy remains weak... There’s nothing in the system at the moment, certainly in China, that suggests there is a big pick-up in store just around the corner,” said Victoria Clarke at Investec.

The HSBC China PMI fell in May to 49.2, the lowest level since October 2012 and down from April’s 50.4. For the eurozone, Markit’s PMI rose to 48.3 from April’s 46.7 but spent its 22nd month below the watershed 50 level that marks contraction. Still, it was its highest since February 2012 and the first time the downturn has eased in four months.

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Markit’s manufacturing PMI data for the US showed a modest rate of growth, with a headline reading of 52.3, up slightly from a six-month low of 52.1 in April and higher than an earlier flash estimate of 51.9.

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