UK manufacturing grows at fastest pace for a year
The UK's manufacturing sector grew at its strongest pace in over a year last month, according to a survey.
The Markit/CIPS Purchasing Managers' Index rose to 51.3 in May from 50.2 in the previous month. 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. "Although the domestic market was the main impetus to new order inflows, demand from overseas markets at least managed to keep its head above water," said Markit economist Rob Dobson. 'Encouraging' survey Analysts felt the survey pointed to better things to come. Alan Clarke at Scotiabank said: "It's encouraging. And given that recently we've tended to see UK data as an early warning of what's happening in the eurozone, it suggests to me that this improving trend in business sentiment will continue." "It's hardly a booming level but it's improving nonetheless," he added. Stephen Cooper, UK head of diversified industrials at KPMG, said conditions remain challenging, but the survey is "a shot in the arm for UK manufacturing, particularly so with the improved view in the eurozone". The comparable survey for the eurozone showed that the decline in bloc's manufacturing sector eased in May as new orders picked up. Markit's Purchasing Managers' Index (PMI) for the eurozone manufacturing sector rose to 48.3 from April's 46.7, marking its highest level in 15 months. The pound rose against the dollar following the release of the UK's PMI survey, rising 0.5% to $1.5289, its strongest level in two weeks. 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. While the survey gave rise to cautious optimism about the state of the UK's economy recovery, weaker lending figures released by the Bank of England highlighted the challenges in the future. New figures regarding the amount of money that banks and building societies are lending out as part of the Bank of England's Funding for Lending Scheme showed a fall of £300m in the first three months of the year.