UK manufacturing PMI rebounds to 54.4 in May, a positive surprise

The manufacturing sector activity in the UK economy rebounded in the month of May, surprising the markets to the upside, the latest data from Markit revealed on Friday.

The manufacturing Purchasing Managers’ Index (PMI) in the UK arrived at 54.4 points in March, as compared to a previous 53.9 reading. Markets had predicted the PMI to tick lower to 53.5.

Key Points:        

Output growth ticks higher despite the slower expansion of new work received.

Supply-chain constraints and cost pressures intensify.

Rob Dobson of Markit commented in the release, “At first glance, the mild acceleration in the rate of output growth and rise in the headline PMI would appear positive outcomes given the backdrop of the slowdown seen in manufacturing since the turn of the year. However, scratch beneath the surface and the rebound in the PMI from April’s 17-month low is far from convincing. “A slowdown in new order inflows meant the expansion in production was achieved only by firms working through their backlogs of work. Weaker than expected sales meanwhile led to the largest rise in unsold stock in the survey’s 26-year history. This suggests that manufacturers have yet to fully adjust their production to the weakening trend in new business growth and there will need to be a rapid improvement in demand if output volumes are to be sustained in the coming months.”