UK manufacturing PMI hits four-year high as costs surge

(Alliance News) - UK manufacturing activity expanded at its fastest pace in four years in May, although firms faced mounting cost pressures and continued disruption to supply chains linked to conflict in the Middle East, survey data showed on Monday.

The S&P Global UK manufacturing purchasing managers' index rose to 53.9 points in May from 53.7 in April, reaching its highest level since 2022 and remaining above the 50-point threshold that signals growth.

The PMI figure came above the flash reading of 53.7 points published on May 21.

The survey showed all five PMI sub-components – new orders, output, employment, suppliers' delivery times and stocks of purchases – were consistent with improving operating conditions for the first time since May 2022.

Manufacturing output increased for a second consecutive month, led by growth in the intermediate and investment goods sectors, while new orders rose for a sixth successive month.

Export business also increased for the fifth month in a row, with stronger demand reported from mainland China, Europe, Japan, North America and South Korea.

However, S&P Global said there were signs some customers were bringing forward purchases to avoid anticipated price increases and supply chain disruption, potentially limiting the durability of the current recovery.

Manufacturers cited the war in the Middle East, commodity market volatility, tariffs, rising labour costs and higher taxes as factors contributing to cost pressures.

Supply chains remained under strain, with delivery times lengthening sharply due to shipping delays and concerns over key transport routes, particularly the Strait of Hormuz.

The disruption prompted firms to increase purchasing activity and build inventories. Stocks of purchases rose for the first time in more than three-and-a-half years and at the fastest pace since July 2022.

Manufacturers passed higher costs on to customers, with output price inflation accelerating to its strongest level since July 2022 and the second-fastest rate recorded in the survey's history.

S&P Global Market Intelligence Director Rob Dobson said: "May saw the UK manufacturing upturn gather pace, as growth of production and business optimism both rose to three-month highs.

"The sustainability of the upturn remains in doubt, however. The recent upturn in new order intakes that is driving the expansion in output is heavily reliant on both manufacturers and their clients front-loading purchases to mitigate expected war-related price increases and supply chain disruption."

The PMI survey draws upon a panel of 650 manufacturers in the UK, with responses collected between May 12 and May 26. Services data will be released Wednesday.

By Eva Castanedo, Alliance News reporter

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