The Chartered Institute of Purchasing and Supply/NTC purchasing managers' index rose to 54.9 last month. In April it was 54.1. Economists expected a slight fall to 53.7. The index has been higher than the 50 mark for 22 consecutive months, the longest period for more than nine years.
However, now many economists anticipate that the interest rates will go up further during this summer. Anything over 50.0 indicates expansions, while anything below shows a contraction.
The growth is caused primarily by the domestic market, although there is also some increase in export orders.
Inflation rose above 3 percent in March and it was the highest rate during the last decade. Economists trying to get inflation back to its 2.0 percent have said that they are looking for any signs that manufacturers are raising up prices, in order to recover profit margins, which were damaged during last year's energy price growth.
Financial markets are anticipating the possibility that the central bank may have to raise interest rates up to 6 percent to battle price pressures, having already raised rates four times since last August up to 5.5 percent.
Analysts say that manufacturers may be raising prices trying to cover the cost of rising raw materials prices. The CIPS/NTC index measuring input price growth in May was up to 64.8, the highest since September.
The Bank of England is expected to increase interest rates by a quarter-point from their current level of 5.5 per cent, with a real possibility that the rise will occur during the next week.
Oil prices were above $70 a barrel again in recent weeks, which have fallen from record position of near $80 last summer to around $50 in January.
The index, showing production rose to 57.5 from 57.3 in April, was the highest since September.
Mark Miller, an economist at HBOS said that it was an encouraging survey, in line with other business surveys, and it did suggest that official data would pick up.- Alla Harutyunyan for HULIQ.COM
