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Manufacturing growth strong but output long way from pre-crisis peak

UK manufacturing growth remained strong in May, although the sector is still way adrift of its pre-crisis peak and would take until late 2015 to achieve full recovery even at current sharp expansion rates, a survey has shown.

The survey, published yesterday by the Chartered Institute of Purchasing and Supply, signalled the UK manufacturing sector continued to enjoy one of its brightest spells of growth in output and new orders in the 22-year history of the report.

CIPS's headline purchasing managers' index, a composite measure of activity which includes output, new orders, employment, suppliers' delivery times and stocks of goods purchased, edged down from 57.3 in April to 57 in May on a seasonally adjusted basis.

In spite of this dip, it remained well above the level of 50 deemed by CIPS to separate expansion from contraction and thus continued to signal strong growth.

Overall growth in new orders remained strong, although the pace of increase eased marginally.

The survey also signalled growth in new export orders remained solid. Although the rate of increase of new export orders also slowed in May, Samuel Tombs, at consultancy Capital Economics, believed the fact it had eased only marginally showed UK manufacturers were coping well with the strong pound, which weighs on their competitiveness in overseas markets.

CIPS highlighted the fact, amid continuing worries about the degree to which recovery is being fuelled by consumers, that producers of investment goods had seen a particularly marked acceleration in the pace of increase of new orders in May.

Employment in UK manufacturing rose for a 13th consecutive month in May, according to CIPS, although the pace of increase eased to its slowest in four months.

CIPS cited broadly based jobs growth, across both small and medium-sized firms and large companies.

Rob Dobson, senior economist at survey compiler Markit, said: "The revival of UK manufacturing continued in May, as the sector basked in one of its brightest growth spells of the past two decades.

"Manufacturing production is currently expanding at a quarterly rate close to 1.5%, according to the PMI, helping the sector take huge strides towards recouping the output lost during the recession."

However, he added: "With manufacturing still some 7.5% smaller than its pre-crisis peak, even at this current growth rate it would take until late 2015 to achieve full recovery."

Mr Dobson declared that sustaining the rebound and continuing to push towards rebalancing the UK economy towards manufacturing therefore remained critical.

He added: "On those scores, the latest survey provides some real positives."

Seasonally adjusted figures published last month by the Office for National Statistics showed UK manufacturing output had risen by 1.4% in the first quarter of 2014. However, in spite of strong growth in recent months, UK manufacturing output in March was only at the same level as back in June 2011, underlining the protracted nature of the economic recovery.

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