The outlook also brightened as manufacturers' positive sentiment rose to its highest level since early-2022, with 63% of companies expecting output to expand over the coming year.
The PMI rose to 51.2 in May, up from 49.1 in April, its highest reading since July 2022 but a tick below the earlier flash estimate of 51.3. The headline PMI has posted above the neutral 50.0 mark in two out of the past three months.
May saw manufacturing production expand at the quickest rate since April 2022, with the upturn broad-based by both sector and company size. All three product categories covered by the survey (consumer, intermediate and investment goods) and all three size definitions (small, medium and large) registered concurrent expansions for the first time in over two years.
Output growth was underpinned by improved intakes of new work, stronger market conditions and efforts to complete existing contracts. The level of new business placed with UK manufacturers rose for the second time in the past three months and to the greatest extent since April 2022.
The upturn in demand was centred on the domestic market, as new export orders fell for the 28th month in a row. There were reduced inflows of new work from several trading partners, including the US, the EU (with specific mentions of Germany and Poland) and the Middle East. That said, the rate of contraction was the joint-weakest in the current sequence of decline (matching March 2022).
Business confidence improved in tandem with the recovery in current market conditions. Manufacturers reported the highest degree of optimism regarding the one-year ahead outlook for production volumes since February 2022. Positive sentiment was linked to hopes that continued economic recovery, promotional efforts and improved export orders would all support growth in the future.
However, some firms also noted concerns about political and economic uncertainty (both at home and overseas). Considerations relating to operating efficiency, cost management and lean production remained at the forefront of manufacturers decision making during May.
Employment was reduced for the 20th successive month, while inventories of finished goods and purchases were both depleted.
Input buying increased slightly during May, halting a 22-month sequence of reduced purchasing activity. Suppliers' delivery times lengthened for the fifth month running, mainly due to transportation issues such as the ongoing crisis in the Red Sea.
May saw average input costs increase for the fifth successive month, albeit to a lesser extent than in April. Manufacturers reported a wide range of items as up in price, including chemicals, metals, paper, polymers, pulp products and timber.
Sector data painted a mixed picture for trends in purchasing costs. While intermediate goods producers saw input prices rise at the quickest rate in almost one-and-a-half years, cost inflation eased sharply in the consumer goods category. The investment goods sector saw purchasing costs decrease for the first time in the year so far.
After strengthening in each of the past five months, May saw the rate of output price inflation hit its highest level in a year. Rates of increase accelerated in the consumer and intermediate goods sectors, but eased at investment goods producers.
Maddie Walker, Industry X lead for Accenture in the UK, said: “News that the UK manufacturing industry has not just returned to growth, but also hit a 27-month high, is a massive boost to an industry that has struggled with inconsistency so far this year. Visible growth for the second time this year indicates that while we are not yet on steady ground, last year’s consistent decline now lies in the past.
“Last month, we saw a rise in domestic client demand for new orders coupled with easing inflationary pressures, which created an optimal environment for growth. Manufacturers can only hope this marks the start of a bright summer for the industry, despite the political uncertainty as we head into a General Election.
“With this in mind, it is crucial for the sector to remain agile to ensure it can deal with the fluctuations. For example, car production is continuing to fall as the transition of car factories to an all-electric future is causing some inconsistencies in supply and demand. The industry must continue making critical investments that play into the UK’s strengths and maintain the competitiveness of the sector. Investments in low-cost and zero-carbon energy to help address the high-power costs and enable manufacturers to meet their decarbonisation targets would help to maintain stability in the sector.”
“Whilst a return to such a height is rightly being celebrated – with business and customer confidence also both on the up – manufacturers must not be complacent.”
