UK manufacturing sector rebounds in May - PMI

23rd May 2024 11:18

(Sharecast News) - The UK's under-pressure manufacturing sector rebounded in May, a closely-watched survey showed on Thursday.

The latest S&P Global flash UK manufacturing PMI came in at 51.3, up from 49.1 in April and a 22-month high. The output index also pushed into positive territory, rising to a 25-month high of 52.7 from April's 49.4.

A reading below the neutral 50.0 indicates contraction, while one above it suggests growth.

The upturn was the second recorded in three months following a long period of decline, S&P Global noted. It said respondents had often linked higher output to stronger client demand as well as emerging signs of a recovery in both export sales and inventory purchases.

However, while the UK services PMI business activity index remained in positive territory, at 52.9, it was down on April's 55.0.

As a result, the UK PMI composite output index was 52.8, down on April's 54.1.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the flash data suggested the economy was continuing to recover from recession.

He continued: "The survey data are consistent with GDP rising by around 0.3% in the second quarter, with an encouraging revival of manufacturing accompanied by sustained, but slower, service growth.

"With companies now reporting the slowest price growth in over three years, and headline inflation falling close to target, the data support the view that the Bank of England will start cutting interest rates in August - providing the data continue to move in the right direction over the summer."

Joshua Mahony, chief market analyst at Scope Markets, said: "UK PMI saw an unexpected rebound in manufacturing, with the sector moving into expansion territory for the first time in almost two years.

"Unfortunately, that strength flew in the face of a sharp pullback for UK services growth, driving the composite figure back down.

"With today's report showing particular weakness for services sector input prices, bulls can take solace in the disinflationary impact of today's PMI survey."

Peter Arnold, EY UK chief economist, said: "The PMIs are often volatile from month-to-month, while the strength of last month's balance did look like an outlier compared with other indicators, so the EY Item Club does not see May's softer outturn as being problematic.

"The other interesting development was the weakness in the costs and prices balances. Input cost inflation was the weakest in seven months, while output prices rose at their slowest pace since February 2021, with the service sector being the source of weakness in both sectors."

The PMI data were collected between 9 and 21 May. Questionnaires were sent to panels of around 650 manufacturers and 650 service providers.