UK manufacturing PMI manages a narrow expansion in May

Industry data showed that manufacturing activity in the United Kingdom narrowly expanded in May, slightly beating analysts' expectations for it to remain in contraction for a second month. In a report, market research group Markit stated that UK manufacturing PMI increased to a seasonally adjusted 50.1 last month from a reading of 49.4 in April, which had been the first contraction in three years and was revised up from an initial figure of 49.2, while analysts forecasted the index to advance to 49.6 in May. 

Nevertheless, the general data still suggests there is an overall lack of confidence with manufacturing still under pressure and the sector will again be a net drag on the economy for the second quarter. Production volumes were broadly unchanged in the latest survey month, as the growth rate of new order inflows remained subdued, albeit slightly quicker than in April. Moreover, there was a negative impact from uncertainty with many companies suggesting that the EU referendum was having a detrimental impact on business. There was notable weakness in the investment-goods sector and strong job cuts in this sector. Overall employment also declined for the fifth successive month, although the pace of decline did slow. The index overall suggests that manufacturing will contract more than 0.5% for the second quarter and will undermine overall GDP data with the economy remaining dependent on the services sector.