British manufacturing activity eased more than expected last month, although a recovery in the euro zone helped increase export orders to their fastest rate in nearly two-and-a-half years, a survey showed today.
The CIPS/RBS Purchasing Managers' Index (PMI) also showed input prices rose at their fastest rate in 16 months which, coupled with increased demand, encouraged firms to raise prices.
The main activity index eased to 53.2 in May, slightly below analysts' forecasts for a reading of 53.5, and down from April's revised 54.0. That still left the index above the 50.0 level separating expansion from contraction for a 10th month running.
Economists said the fall was expected after April's sharp rise and reinforced expectations the Bank of England would keep rates at 4.5 per cent for now.
Short sterling interest rate futures barely reacted to the data.
The new orders index eased slightly last month to 55.5 from 55.9, but export orders picked up markedly, helped by growing demand from strengthening euro zone economies, notably Germany.
Orders from Japan and the United States were also strong, boosting the export orders sub-index to 54.8 in May from 52.9 in April, the highest since January 2004.
Rising energy and raw materials costs continued to propel input prices in May, with an index reading of 67.4 - the highest since January 2005 - against 64.0 in April.
Prices at the factory gate also rose as manufacturers tried to recoup some of those costs, with that index rising for the 10th straight month in May to 53.7 from 52.0.
April's growth in staffing levels was reversed in May, with the employment index slipping back below the no-change mark to 49.1.