Output growth accelerates in October

The South West private sector recovered some growth momentum at the start of the final quarter of 2015, according to the latest PMI® survey data. The rate of expansion in output strengthened to a three-month high, having slowed throughout the third quarter. Growth of new business resumed and firms increased workforces at a stronger pace, although the volume of outstanding business continued to fall. Meanwhile, input costs decreased further, reflecting a sharp drop in manufacturing purchase prices.

The seasonally adjusted Lloyds Bank Commercial Banking South West Business Activity Index remained above the no-change mark of 50.0 in October, indicating overall growth of private sector output across the region. The Index rose for the first time since June, to 54.1 from 52.2 in September, and indicated the fastest rate of expansion in three months. Overall growth was solid and in line with the long-run survey average, but remained weaker than the UK trend.

Activity levels were supported by rising inflows of new business in October, following a marginal decline in September. Nonetheless, the growth rate of new work was only modest and weaker than the UK private sector average.

Private sector employment in the South West rose for the thirty-first successive month in October. The rate of job creation strengthened to a three-month high, but remained one of the weakest among the 12 UK regions covered. In fact, only Scotland and the North East registered slower rises in workforces than the South West in October.

Higher employment and lacklustre growth of new work contributed to a further drop in outstanding business in October, the fifth in as many months.

A sharp fall in manufacturing purchase prices led to an overall reduction in private sector input costs in October. The rate of decline was only marginal, however, as service providers’ input prices continued to rise.

Private sector firms raised their own prices charged at the fastest rate since July. The South West registered the third-strongest increase in charges among the 12 regions covered, behind London and Wales.

Commenting on the Lloyds Bank Commercial Banking South West PMI survey, David Beaumont, area director for SME Banking in the South West, Lloyds Bank Commercial banking, said:

“The improvement in the headline index in October is welcome news, although it is too early to say that the South West is set for an upturn in growth over the final quarter as a whole. Although new business rose, the rate of expansion was modest and backlogs continued to fall. The South West also remains among the weakest-growing UK regions in terms of jobs. The price indices paint a more favourable picture for firms’ margins.”