UK manufacturing was marginally weaker than originally reported in May. The headline flash PMI was trimmed just a tick to 51.2 and so remained more than two points stronger than its final April mark and, importantly, above the 50-expansion threshold.

The return to positive growth was led by production which increased by the most in more than two years. The broad-based upswing was underpinned by rising new orders which increased more sharply than in any month since April 2022. In addition, the upturn was led by domestic demand as exports fell for a 28th month in a row. Employment was still cut again but business confidence about the year ahead strengthened to its most optimistic level since February 2022.

Inflationary signals were relatively robust. Input costs were up for a fifth straight month, albeit by less than in April, while factory gate inflation climbed to its highest mark in a year.

The final May report paints a slightly mixed picture of UK manufacturing. In terms of output and, crucially, demand, underlying trends appear to be moving in the right direction but inflationary pressures remain uncomfortably strong. For the BoE MPC, today's data are likely to strengthen the view of a probable majority of members that it is still too early to reduce Bank Rate. The latest results put the UK RPI at minus 14 and the RPI-P at minus 35. Overall economic activity is falling behind market expectations.

No revision is expected to the flash data leaving the headline index at 46.7, up from April's final 49.1.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the and S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.