01 June 2009 | Martha McKenzie-Minifie
The manufacturing Purchasing Managers' Index (PMI) reached a 12-month high in May, exceeding market expectations.
The headline CIPS/Markit UK Manufacturing PMI - where a figure below 50 indicates contraction - recorded 45.4 in May. In April it was 43.1 and in May last year, 48.5.
Markit senior economist Rob Dobson said the figure was "better than market expectations". He added: "Although the PMI remains below levels consistent with outright recovery, this is a further sign that the downturn in UK manufacturing is easing."
Roy Ayliffe, CIPS professional practice director, said manufacturing appeared "close to turning the corner" but warned that, despite slight improvements in trading conditions, "'caution' is hot on the lips of UK manufacturers struggling to survive the onslaught of the recession".
He added: "Purchasing managers from larger firms report they are making a quicker comeback than SMEs, which are still battling away at the front line."
The report said consumer goods producers reported an increase in production for the first time in 14 months.
But weak demand and lower input prices led to a "marked reduction" in average output charges last month. The PMI recorded 46.7 last month for output charges. In April it was 45.0 and in May last year, 62.0. "A number of firms recorded that discounted prices had been offered to secure new contracts," the report found.
May data pointed to a decline in manufacturing employment for 14 months running, it said, with the rate of reduction "remaining rapid".