June 1, 2017 / 8:34 AM / 3 months ago

UK manufacturing keeps up momentum in May as hiring rises - PMI

A general view of the factory floor at Camira Fabrics in Huddersfield, Britain, May 2, 2017.Andrew Yates

LONDON, June 1 (Reuters) - British manufacturing chalked up its second-fastest growth in nearly three years last month, putting the sector on track to shrug off election and Brexit-related uncertainty and improve on a weak first-quarter performance, a survey showed on Thursday.

The Markit/CIPS manufacturing purchasing managers' index (PMI) slipped to 56.7 in May from a three-year high in April.

Aside from the previous month's PMI, that was its strongest reading since June 2014.

"On this basis, the sector should have sufficient momentum to see it through the uncertainty generated by the current unexpected general election and into the start of Brexit negotiations," IHS Markit economist Rob Dobson said.

Britons vote in a week's time in an early national election called by Prime Minister Theresa May to bolster her standing before nearly two years of talks to leave the European Union.

At the start of the campaign in April, May seemed on track to win an increased majority. But polls over the past week show the opposition Labour Party has eaten into her lead.

May has highlighted the record number of people in work in her campaign, and Thursday's figures showed that manufacturers planned to hire staff at the fastest pace in nearly three years.

Companies wanted extra staff to handle new orders and increase capacity, Markit said, as backlogs of work lengthened by the most in six years.

The upbeat tone contrasts with gloomy official figures for the first three months of the year, when factory output inched up by just 0.3 percent.

The broader economy also struggled earlier this year as consumers felt squeezed by rising inflation, driven in large part by sterling's fall of more than 10 percent after last year's vote to leave the European Union.

Almost all economists expect inflation pressures on consumers to intensify later this year, but the silver lining of a weak currency - more competitive exports - is proving elusive.

"The trend in foreign demand (is) continuing to improve only in fits and starts, despite the assistance of a historically weak sterling exchange rate," Dobson said.

Manufacturers in the PMI survey reported a "solid" increase in foreign demand, but domestic orders rose faster and companies reported strong growth in production for both business customers and consumers.

Overall, orders were growing at the second-fastest rate in the past three years, just off April's peak - matching similar upbeat results in a survey by the Confederation of British Industry earlier this month.

Factories' raw material costs continued to rise, reflecting sterling's weakness and higher global commodity prices, but the increase was slower than before, Markit said.

Reporting by David Milliken, editing by Larry King

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