UK manufacturing growth at two-year high, according to survey

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Britain’s manufacturing malaise might finally be coming to an end after the strongest growth for more than a year in May and June, the Chartered Institute of Purchasing & Supply has said.

The Markit/CIPS Purchasing Managers' Index rose to 51.3 in May from 50.2 in the previous month, and rose to 52.5 last month (June) - its highest level since May 2011. A figure above 50 indicates expansion.

Markit said both production and new orders had picked up, with the domestic market driving demand for new business. The survey also indicated that the manufacturing sector created jobs for the first time in four months.

Markit also said that the cost of raw materials had eased somewhat, thanks to weaker commodity prices.

May’s rebound in manufacturing activity signals the strong likelihood of a positive second quarter for the sector. Broad based improvements across industry supported by rising order inflows, even from parts of Europe where the pace of contraction is now starting to ease, provide some reasons for cautious optimism that manufacturing growth is turning a corner.

Manufacturers are being encouraged to take advantage of a period of more stable working conditions to push forward with capital investment and growth plans rather than treading water by focusing solely on maintaining working capital.

Hopefully this will encourage UK manufacturers to look more positively at investment decisions as we move into the second half of the year.

The PMI results show that May’s strong orders relied mainly on the domestic market although exports showed some improvement too.

Manufacturing accounts for just over 10% of the UK economy. But expansion in the sector tends to have a knock-on effect elsewhere, especially in the services sector.