The British manufacturing sector contracted in April but showed signs of stabilizing at the start of the second quarter of this year, said a market sensitive report on Wednesday.

According to the report jointly issued by Markit and the Chartered Institute of Purchasing and Supply (CIPS), the Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) rose to 49.8 in April after two months of decline. The PMI for manufacturing was 48.6 in March.

A PMI reading of 50 or greater indicates expansion, while below 50 indicates contraction.

Rob Dobson, a senior economist at Markit, said, "Following the poor start to the year, when manufacturing acted as a drag on the economy the opening quarter, it is welcome to see the sector showing signs of stabilizing in April."

According to the report, British manufacturers benefited from a modest improvement in new export order inflows, from faster growth markets such as Latin America and the Middle East, as well as success in traditional targets like North America and Australia.

"The level of new export work received rose for the first time in over a year and at the fastest pace since July 2011. However, demand from euro area remained lackluster," it said.

"Manufacturers report that the domestic market is just about holding its head above water, but was still a key cause of disappointingly weak demand, while a solid improvement in new export orders was the real surprise," Dobson said.

"With forward-looking indicators ticking higher, the sector should at least be less of a drag on broader GDP growth in the second quarter," Dobson said.

"The sector's steady performance in April, which saw an increase in output, was supported by easing prices for fuel and commodities, which is welcome news," said David Noble, CEO at the CIPS.

"Businesses remain cost cautious, but the latest figure at least a chink of light in the tunnel," he said.

Manufacturing output makes up just over 10 percent of the British economy. Endi

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