The latest reading pointed to a further growth slowdown from the 22-month high recorded in January (55.0). Weaker new business growth and softer job creation helped to offset a marginally stronger upturn in production volumes.
May data indicated that manufacturing output increased for the twelfth month running. The rate of expansion picked up slightly from April’s seven-month low, but remained relatively modest overall. Survey respondents noted that subdued new business growth and more cautious inventory policies had acted as a brake on production requirements. Reflecting this, stocks of finished goods were accumulated at a slower pace than seen at the start of 2017. Meanwhile, preproduction inventories dropped for the second month running, which contrasted with robust rates of stock building earlier this year.
New order levels increased again in May, although the rate of expansion was the least marked recorded since September 2016. This was mainly linked to subdued client demand. Some manufacturers also cited weak export sales, as highlighted by a slower upturn in new work from abroad than that seen in April.
The latest survey pointed to a decline in backlogs of work for the first time since May 2016. Manufacturing firms noted that sustained staff hiring had helped to alleviate capacity pressures. Payroll numbers increased at a modest pace in May, although the latest rise was much softer than the 18-month peak seen in December 2016. Survey respondents noted that resilient business confidence and optimism about the general economic outlook had helped to underpin staff recruitment in May.
Meanwhile, input price inflation eased sharply from April’s two-and-a-half year peak. Moreover, the latest rise in average cost burdens was the slowest for six months. Receding cost pressures and intense competition for new work led to a slower pace of factory gate price inflation in May.