The size of the increase - the largest in more than three years - was a surprise and should be treated with caution because month-on-month data can be volatile. Yet it generally fits in which the picture from our latest Manufacturing Outlook survey that the worst may be behind the sector. It also backs up our survey suggesting that there are no concrete signs that uncertainty associated with the upcoming referendum has had a major impact on manufacturing so far.
Most sectors gained ground
After the mixed picture across manufacturing in recent months, the performance of most sectors turned positive. Pharmaceuticals showed the strongest gain, no doubt helped by the end of the patent cliff leading to increased R&D activity in key pharmaceutical companies and , in turn, new drugs coming through the pipeline. Transport was also robust, suggesting that the demand for motor vehicles is holding up and the aerospace industry is still working its way through a large backlog of orders. At the same time, there was more evidence that the weakness of manufacturers embedded in the oil and gas, and steel, supply chains is bottoming out.
The bottom line
While today’s data might not be enough to push manufacturing back into growth in 2016q2, it is generally in line with our survey suggesting that manufacturing seems to be turning a corner. The drag from the challenges facing manufacturing over the last year or so – weak global growth, the low oil price and the global oversupply of steel – appear to be easing and the sector looks set to return to growth in the second half of this year.