British manufacturing activity held steady in May at the previous month's 15-year high, a survey showed on Tuesday, but the recovery picture was clouded by signs of accelerating price pressures.
The Markit/Chartered Institute of Purchasing and Supply manufacturing PMI was unchanged at 58.0 in May, slightly above the 57.8 consensus forecast. It has been above the 50-mark, which separates growth from contraction, since July 2009.
Manufacturing output increased for the 12th consecutive month, although the rate of growth rate eased slightly for a second month.
Analysts said the figures were impressive, particularly when compared to data from some euro zone countries [ID:nSLAVGE65K], but they were unlikely to stay at such a high level.
"The manufacturing sector has had a spectacular bounce, not least from the record low interest rates, but this is as good as it's going to get," said Alan Clarke, economist at BNP Paribas, "I think some of the sugar rush is starting to fade."
Britain's coalition government, formed after an inconclusive election on May 6, may take some comfort from the figures as it tries to secure the recovery from an 18-month recession that ended in late 2009.
Prime Minister David Cameron has said he wants to rebalance the British economy, with a greater emphasis on manufacturing and the private sector. His government will set out spending plans on June 22 in an emergency budget expected to explain how it will try to cut the budget deficit.
The survey showed a further robust increase in new orders, with the rate of expansion remaining close to April's six-year high. Export orders rose for a ninth consecutive month as firms continued to benefit from a competitive exchange rate.
INFLATIONARY PRESSURE
The monthly survey of 600 industrial companies showed average purchase prices in May rose at the fastest rate since August 2008, extending a nine-month run of gains. Factory gate price inflation, meanwhile, rose at the fastest rate since September 2008.
The Bank of England maintains that the recent spike in inflation will prove temporary, but some members of the monetary policy committee are growing nervous this assessment may be too optimistic.
Consumer price inflation jumped to a 17-month high of 3.7 percent in April, almost double the BoE's target.
The survey showed the rate of jobs growth eased from April, although it was still close to that month's three-year high.
Improved demand from China, Europe, the United States, Africa and the Middle East boosted new export orders. However, their rate of growth was also slightly down from April.
Rob Dobson, senior economist at Markit, said strong export growth and robust domestic demand had helped UK manufacturers this year, but the outlook was far from certain.
"Austerity measures announced in the UK may cool home demand, while export sales may be hit by the sovereign debt crisis in our largest trading partner the euro zone," he said.
