SW sees slowest rise in output in 2.5 years

The South West private sector grew at the slowest rate in nearly two-and-a-half years in September, according to the latest PMI® survey data, mirroring the trend shown across the UK as a whole.

This mainly reflected the first decline in new business since March 2013. Employment continued to rise, but at the slowest rate seen across the UK. The latest survey also signalled a decline in input prices for the first time since December 2008.

The seasonally adjusted Lloyds Bank Commercial Banking South West Business Activity Index remained above the no-change mark of 50.0 in September, indicating overall growth of private sector output across the region. The current sequence of expansion now stretches to two-and-a-half years. That said, the Index fell to 52.2, the lowest since April 2013. It also signalled a weaker rate of expansion than all other UK regions except the North West and Scotland.

The volume of new business received in the South West private sector declined in September for the first time since March 2013. This mainly reflected a solid fall in manufacturing new orders.

The current survey-record sequence of employment growth was sustained in September. That said, the rate of job creation was the weakest since April 2013, and slower than all other UK regions monitored. Manufacturers shed staff during the month.

The fall in new work relieved further pressure on capacity in September, as the volume of outstanding business in the private sector declined for the fourth month in a row. The rate of contraction was the weakest in this sequence, but stronger than the UK average.

South West private sector firms reported falling average input prices for the first time since December 2008. Although the rate of reduction was only marginal, the South West was one of five UK regions to record a decline. Manufacturing was the source of the overall fall in input prices, as service sector costs continued to rise.

Falling input prices did not translate into a corresponding decrease in charges, however, as a solid rise in service sector tariffs outweighed a slight decline in manufacturing output prices.

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

“The South West, along with the rest of the UK, is clearly entering a soft patch as we move into the final quarter of 2015. Moreover, the South West remains among the UK’s weaker regions. The fall in new business is a concern, though it is too early to say if this will translate into an outright drop in total activity over the coming months. Firms continued to add staff, but the pace of job creation has slowed further.”