A key factor weighing on the headline reading was the softest expansion of output since June 2016. May data signalled only a marginal rise in production that was often linked to clearing backlogs of previously-placed orders.
At the same time, manufacturers signalled the first decline in new orders since August 2009. Though only fractional, survey respondents stated that weak client demand drove the fall. Some firms also noted that customers were postponing orders due to growing uncertainty about the outlook. Similarly, new business from abroad contracted for the first time since July 2018, albeit at a marginal rate.
Consequently, manufacturers exhibited a lower degree of confidence towards output over the coming year. Expectations for growth dipped to their joint-lowest since the series began in July 2012, as firms highlighted concerns surrounding ongoing trade tensions and a growing trend of customers postponing new orders, especially among large clients.
On the price front, cost burdens increased at only a modest rate in May. The rise was the slowest since July 2017, with reports of tariffs driving costs higher being countered by
increased competition among suppliers. Subsequently, firms increased their factory gate charges only marginally amid efforts to remain competitive.
Meanwhile, firms signalled a further increase in employment in May. The upturn was commonly linked to the replacement of voluntary leavers and retirees. Nonetheless, the expansion was the slowest since March 2017 amid tight labour market conditions.
Finally, purchasing activity was broadly unchanged in May as firms indicated greater efforts to use current inventories for production and increased efforts to readjust stock levels in light of softer demand conditions.