- The manufacturing sector grew at a record rate in May as the PMI increased to 65.6 from 60.9 in April. Output grew at the fastest rate for 93 months
- Other elements of the survey relating to orders, backlogs of work and confidence were at – or near – record levels, boding well for future activity
- A record high employment reading added to recent encouraging news on the labour market
- However, there are still concerns about supply chain delays among manufacturers
- Input and output prices rose at record rates which is likely to fuel mounting concerns over inflation
- Even allowing for the fact that the purchasing managers’ surveys can overstate movements in the economy at times of rapid change, the record level of the May manufacturing PMI is particularly impressive
- May’s survey fuels belief that the UK economy is well on course for a strong rebound in the second quarter. It supports the EY ITEM Club’s upgrading of its 2021 GDP growth forecast to 6.8% – and, at the moment, it looks like growth could very well come in even higher
Howard Archer, chief economic advisor to the EY ITEM Club, says:
“The purchasing managers survey pointed to the manufacturing sector expanding at a record rate in May.
“The PMI increased to 65.6 – revised down from the ‘flash’ reading of 66.1 – from 60.9 in April from 58.9 in March, 55.1 in February and a three-month low of 54.1 in January.
“Output growth was at a 93-month high in May with the index climbing to 63.0 from 59.1 in April and a nine-month low of 50.5 in February.
“New orders grew at a record rate. Markit said that companies linked new order growth to rising business confidence, the further re-opening of the UK economy and reduced issues relating to COVID-19.
“While domestic demand improved markedly, there was also a record rise in foreign orders.
“Employment also rose at a record rate in May, adding to recent encouraging news on the UK labour market.
“Confidence in future business rose to the highest level since the series started in July 2012. However, there are ongoing concerns about supply chain delays among manufacturers
“Input costs rose at a record rate. This was due to strong demand for manufacturing inputs, higher transport bills and a spike in commodity prices. This led to output prices also rising at a record rate.”