The pace of decline in Britain's beleaguered manufacturing sector hit its lowest level in a year last month, reinforcing hopes that the worst of the economic slump could have passed.

The purchasing managers' index (PMI), which measures activity in the manufacturing sector, improved in May to a reading of 45.4, up from 43.1 in April.

Although the sector is still in decline, the figure is the best since May last year and surpassed analysts' expectations.

It was the third consecutive month the index improved.

The new orders index also improved to a 14-month high of 48.9.

The data is the latest to give hope that tentative signs of an uplift in the economy are appearing.

Last month figures showed that unemployment registered its smallest rise for six months in April and that production of goods from factories across the country that month also fell by only 0.1 per cent, the smallest decline in more than a year.

Separately today, the Engineering Employers Federation said that it expected the pace of decline in the sector to ease markedly in the next three months and that growth could return by the end of the year.

Howard Archer, chief UK and European economist at IHS Insight, said: "The further substantial moderation in the rate of decline in UK manufacturing activity in May is clearly good news and boosts hopes that the economy could start growing before the end of the year."

He cautioned, however, that manufacturers "still face serious handicaps" and that sustainable growth in the sector "may yet be some way off".

Philip Shaw, an Investec analyst, said that the figures were "very encouraging".

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