By ILONA BILLINGTON 

LONDON -- The manufacturing sector contracted last month in the euro zone and the U.K., but the decline was less severe than in previous months.

The Purchasing Managers Index for the euro zone's factory sector rose to 40.7 in May from 36.8 in April, according to data released Monday by Markit Economics. The increase of 3.9 points was the largest since records began in June 1997.

In the U.K., the manufacturing sector shrank for the 14th consecutive month in May, but the reading of 45.4 compared with a revised 43.1 for April and extended the recovery from February's record low of 34.9, Markit Economics and the Chartered Institute of Purchasing and Supply said in separate statements.

For both the euro zone and the U.K., a reading below 50 indicates that the sector is still contracting.

The euro zone's manufacturing PMI has been picking up from the lows seen earlier this year in line with other economic indicators, suggesting that total economic growth likely reached a trough in the first quarter of this year. The index is based on data from Germany, France, Italy, Spain, Ireland, Austria, Greece and the Netherlands, which account for about 92% of the bloc's manufacturing activity.

"Both the PMI and output index registered their greatest month-on-month gains in the survey history and, along with the index for new orders, rose above earlier flash estimates," said Rob Dobson, senior economist at Markit Economics.

The details of the survey showed that the rate of decline reported in new orders and output were slower than the rate reported in economists' flash estimate, said Mr. Dobson. However, he added that final data suggested "the downturn in employment accelerated slightly towards month-end, implying that we remain a long-way off job-market stabilization."

While the data offer some good news for the economy, the sector remains firmly in contraction territory. As the euro remains firm against the dollar, the European Central Bank is widely expected to confirm its plans to buy covered bonds at its monthly meeting Thursday.

"Manufacturers are likely to continue to find life very difficult over the coming months as they are faced by still very weak demand in domestic and export markets, as well as intensified competition," said Howard Archer, chief European and U.K. economist for IHS Global Insight.

Germany's manufacturing PMI rose to 39.6 in May. That compared with 35.4 in April and was stronger than the 39.1 economists had expected. French manufacturing PMI rose to 43.3 in April, also above estimates of 43.1. Italy's manufacturing PMI increased to 41.1 in May from 37.2 in April, beating the 39.2 forecast by economists.

—Joe Parkinson contributed to this article.