Hopes rise as decline in manufacturing slows

UK manufacturing declined at its lowest rate for a year last month, boosting hopes that there really are green shoots of recovery appearing in the hardest-hit part of the economy.

The Chartered Institute of Purchasing and Supply's index of activity came in at 45.4 for May which, while it remains below the neutral score of 50, is certainly better than the 43.1 registered in April.

However, economists warned that the figure should not be heralded as a sign that the economy is about to turn the corner. Instead, they suggest it shows that the sharp levels of destocking which were seen during the first quarter of the year are slowing.

Vicky Redwood of Capital Economics said: "Overall further evidence is pointing to a more modest drop in GDP in the second quarter than the first - but there is still a long way to go before a sustained recovery looks likely."

EEF, the manufacturers' trade body, said it still expects British manufacturing output to fall by a record 11% this year, but that the pace of decline will ease considerably in the coming three months.

"The automotive and metals sectors are close to the bottom of the cycle," said EEF economist Lee Hopley. "However the timing of any upturn is uncertain."