UK Manufacturing PMI surges to record high in May

According to the report from IHS Markit/CIPS, conditions in the manufacturing sector improved at an unprecedented rate in May, as output growth strengthened and new orders rose at the quickest pace in the near three decade survey history. Looser pandemic restrictions and high levels of pent-up demand meant that the rapid revival in labour market conditions continued, with staffing levels also rising at a record pace.

The seasonally adjusted PMI rose to 65.6 in May, up from 60.9 in April, above July 1994's previous record high of 61.0. The PMI has signalled improvement in each of the past 12 months. Manufacturing production rose at one of the quickest rates in the series history, bettered only by those registered in August 2013 and July 1994. 

Underpinning the latest increase were record gains in new business, as domestic and overseas demand continued to revive. Companies linked new order growth to rising business confidence, the further re opening of the UK economy and reduced issues relating to COVID-19. New export orders also rose at a survey-record pace in May, amid reports of stronger demand from the EU, the US and China. That said, there were continued signs that while large companies were seeing record gains in new export work, the rate of increase at small firms was comparatively mild. The corollary of the strong upswing in the performance of the manufacturing sector was pressure building on capacity, with backlogs of work rising to the greatest extent in the survey history. This was a major factor encouraging firms to reinvigorate their recruitment plans, leading to a record increase in staffing levels at manufacturers.

May saw business sentiment rise to its highest level since data on future activity were first collected in July 2012. Over 70% of companies forecast that production would be higher in one year's time, compared to only 3% expecting a decline. Improved optimism reflected the end of the pandemic, economic recovery, planned business expansions, a revival in World trade flows and reduced supply-chain issues.