There’s been some pretty mixed news on the state of UK manufacturing over the last week. Or at least that’s how it has been portrayed.

According to interpretations of the latest PMI figures, the sector has gone “from rapid expansion to near stagnation”, while the latest Engineering Employers’ Federation (EEF) figures suggest that manufacturers continue to drive UK economic growth on the back of export-led demand.

Indeed, the EEF forecasts that manufacturing will grow by 3.2 per cent this year. That’s below its earlier forecast of 3.5 per cent but is still more than twice as fast as its forecast for the wider economy.

In fact, according to the EEF, over the last six months, while the wider economy stagnated, manufacturing grew by some 2.3 per cent. And since the recovery began, the sector has been responsible for around a third of the UK’s economic growth despite accounting for just 13 per cent of the UK economy. That’s pretty impressive stuff.

Meanwhile, the PMI figures, where a number above 50 indicates expansion, came in at 52.1 last month, down from a (revised) figure of 54.4 in April.

These were interpreted as the worst figures since the recession was at its most severe, back in September 2009. As recently as January this year the figure was over 60.

Weaker domestic demand and a slowdown in export growth were cited by analysts as the main factors behind the decline.

Although the PMI figure remained above 50 for the 22nd consecutive month, new orders were seen as especially weak, being at their lowest since May 2009.

Add in the latest figures from the ONS for the first quarter of this year and the picture emerging is of a two-speed manufacturing sector, with stagnating domestic activity being offset by growing exports.

The fact that consumer goods producers saw the steepest contractions in production and new orders during May reflects the current weakness of domestic demand. And while growth was healthier for investment goods producers, reflecting overseas demand, that rate of expansion slowed sharply, as with exports more generally.

So what’s going on?

Despite the sharply contrasting interpretations, the two surveys are not so different in what they’re actually telling us.

The EEF, while rightly pointing to more rapid growth in manufacturing than the wider economy, does suggest that manufacturing growth is slowing. Growth in the last six months was 2.3 per cent and for the whole of 2011 it is forecast to be 3.2 per cent.

That’s quite a slowdown in growth in the second half of this year.

Essentially, that’s what the PMI tells us, as a forward-looking indicator. Growth for the sector is still positive but is slowing markedly. Where interpretations of the two surveys genuinely differ is that the PMI hints at something of a slowdown in overseas demand growth, while the EEF still sees this as strong. That difference may be down to where the firms surveyed actually export to.

In fact, as I’ve been arguing in my Birmingham Post blog for some time, a slow-down in manufacturing growth was indeed expected around now given that: 1. the effects of the re-stocking boost would be time-limited; 2. the sector’s growth figures anyway deceived in that they were from a very low base (manufacturing output fell by some 15 per cent during the recession); 3. strong headwinds from the Eurozone periphery in particular will dampen export growth even if overall exports are still growing; and 4. access to finance remains a huge issue for many smaller manufacturers, especially in the auto sector.