British manufacturing activity eased more than expected last month, although a recovery in the euro zone helped to bump up export orders at their fastest rate in nearly two and a half years.
The Chartered Institute of Purchasing and Supply/RBS Purchasing Managers' Index (PMI), which tracks the state of British manufacturing, 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. But that was still left the index above the 50 level separating expansion from contraction for a 10th month.
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 such as Germany. Orders from Japan and the US 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 in April.
Prices at the factory gate also rose as manufacturers tried to recoup some of those costs, with that index rising for the10th straight month in May to 53.7 from 52. April's growth in staffing levels was reversed in May, with the employment index slipping back below the no-change mark to 49.1.
