Private sector growth at 12-month high

Private sector activity in the South West rose at the fastest pace for a year in June, according to the latest PMI® survey data.

That followed a slowdown in growth over the previous two months, and the latest expansion placed the South West among the fastest growing UK regions. That said, growth in total activity was partly accounted for by falling backlogs, as new business growth picked up only slightly during the month. Cost pressures remained historically weak, while jobs were created at a strong pace.

The seasonally adjusted Lloyds Bank Commercial Banking South West Business Activity Index rose to a 12-month high of 58.3 in June, from 55.1 in May, indicating a marked rate of expansion in private sector activity in the region. The latest figure was above the long-run average of 54.1, and the All-UK figure for June of 57.4.   

Sector data signalled that services continued to drive overall expansion in June. Growth of manufacturing output strengthened slightly, but remained comparatively modest.

Growth of business activity was supported by both higher intakes of new business and a drop in backlogs. The latter declined for the third time in five months, and at the fastest rate since May 2013. This was mainly reflective of a steep drop in manufacturing backlogs.

June survey data indicated that cost pressures in the South West private sector remained relatively subdued. The rate of inflation eased slightly since May, and was weaker than the long-run survey average.

Firms raised their charges for goods and services for the second month running in June. The rate of inflation picked up slightly, but remained weak in the context of historic survey data.

The South West’s private sector labour market remained strong in June, with employment rising for the twenty-seventh month running, a joint-survey record sequence. The rate of job creation remained strong, and was broad-based across manufacturing and services.

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 pick-up in growth in the South West at the end of the second quarter is encouraging, and the region saw a stronger acceleration than the UK as a whole. Moreover, employment continues to rise and cost pressures remain limited. That said, new business growth remains weak as firms have reduced their backlogs, which raises a question mark over whether we will see a further pick-up in July or a slowdown in growth.”