The CIPS Purchase Managers Index (PMI) was released today, recording a figure of 50.8 in July, up from 47.4 in the previous month. With the PMI index rising above 50 the manufacturing sector is now showing signs that it is starting to grow again, although at a very modest pace.

The manufacturing sector joins the services sector in returning to growth, which recorded results above 50 in both May and June and is forecast to expand again in July.

This should be seen as a positive sign that the economy is now past the worst of the economic downturn and is slowly returning to growth. However, at just above the 50 mark the data is not showing a rapid rebound in activity but a very modest increase in activity. Given that the economy has so far shrunk nearly 6% since the end of the first quarter in 2008, it will take either much stronger growth than this or a very long time indeed to return the economy to where it was in early 2008.

Recent data has also revealed that employment expectations in the manufacturing sector are starting to improve. This is not to say that employment in the sector is expected to grow in coming months, but the rate at which it is falling is set to slow.

Manufacturing in the UK has lost around 150,000 jobs since the start of this economic downturn, but it should be remembered that the sector is in a process of long-term decline. The sector lost jobs throughout the boom years of this decade and since 1980 has seen total employment fall by over 40%.

On the whole, today’s result should be seen as a positive but tentative sign that the economy is starting to improve. The economic environment remains fragile and a smooth transition to normal conditions is unlikely. Nevertheless, should this trend continue, the economic outlook could be better than many economists have been forecasting.

An article released yesterday in the Financial Times shows the extent of the economic uncertainty that exists at the moment.

The paper sent a survey to leading UK economists asking broad questions about the outlook for the economy, employment, house prices, government spending etc.

The paper printed the responses from the various experts, and in typical economist fashion they came up with very different views for the economy.

For example, when asked whether 2009 would show the first "green shoots" of recovery in the economy, there was an almost even split between those answering yes and those answering no. Looking closer at the responses given the reasons for the responses were also very different.

Often the survey also seemed to suggest different interpretations of various economic terms led to different survey responses. For example, some respondents defined economic recovery as recording positive growth and others thought it meant seeing a return of trend growth. These are significantly different with the later being much harder to achieve.

This article has helped to confirm that we are entering a very uncertain time. I remain hopeful that we will see the first signs of recovery before the end of the year, but so much could happen to put this out of reach.

You may have to register with the FT web site (for free) but its worth having a read of this article.