UK manufacturing sector remains weak in May; PMI up slightly to 50.1

The manufacturing sector of the UK remains subdued in May. The seasonally adjusted Markit/CIPS Purchasing Managers’ Index was up marginally to 50.1 from April’s 49.4. Volumes of production remained mostly same in the most recent survey month as the pace of growth in new order inflows continued to be weak, though slightly quicker than in April. A rise in new business was recorded, suggesting an additional growth in new work from domestic clients. On the contrary, the new export business level declined for the fifth straight month.

According to manufacturers, the subdued new order inflows are due to weaker global economic growth, market uncertainties and challenging exchange rates. The market uncertainties partially reflected the upcoming EU referendum. More than one third of respondents in the survey have witnessed an adverse effect on their business from the uncertainty regarding the EU referendum.

Meanwhile, production and new business in the intermediate goods sector expanded further in May, along with a renewed growth in both variables at consumer goods producers, said Markit. The investment goods industry continued to be weak. Job losses were recorded in the manufacturing sector for the fifth consecutive month.

But the reduction pace slowed to a three-month low and was just moderate in all. Layoffs were concentrated on softer performing investment goods industry. On the contrary, growth in new order in the intermediate and consumer goods sector urged companies to raise employment.

The work-in-hand level at manufacturers in the UK declined noticeably in May. Moreover, the depletion pace rose to the fastest in more than three years. Finished products and stores of input both dropped further. The contraction pace in input buying volumes was the most rapid in more than three years. Declines were registered throughout intermediate, consumer and investment goods sectors. Weak demand for raw materials signifies that suppliers lead times were unchanged, noted Markit.