Lloyds TSB England Regional PMIs
Business activity dips slightly at start of fourth quarter
Business output across the majority of the English regions slipped back into contraction during October, ending a two-month period of private sector output expansion, according to the latest Lloyds TSB Regional Purchasing Managers’ Index® (PMI®).
The index slipped to 49.7 in October, below the crucial 50.0 mark representing growth. It had been 51.9 in September, indicating only a marginal overall rate of reduction in private sector business activity. The South West and North East reported the fastest declines in output respectively. Although the rate of contraction in London was marginal, the latest reading was the weakest for three-and-a-half years. Meanwhile, the East of England, North West and South East were the only English regions to buck the overall downward trend in business activity during October. Sector data revealed that manufacturing output generally remained weaker than for services activity across the English regions.
October’s data showed higher levels of new business in seven of the nine English regions, with the strongest expansion in the North West. However, growth of new work was generally slower than in September, with only the East Midlands and South East registering an acceleration. Some survey respondents cited subdued underlying demand, especially from export markets, alongside intense competition for new work. The North East and West Midlands were the only regions to post outright reductions in new business levels during the latest survey period.
Private sector companies reported further reductions in their backlogs of work during October, with the East Midlands and North East the only exceptions. The sharpest rate of reduction was in the South West, followed by the East of England and West Midlands. Lower levels of work-in-hand were generally linked to subdued new order gains and spare capacity among private sector businesses.
Five of the nine English regions reported an overall reduction in private sector employment during October, but the rate of job reductions was generally only modest. Of the four regions that saw rising staffing levels, the strongest expansion was in the East Midlands. Despite this increase last month, job creation in the East Midlands was at its slowest rate since August 2011. Where a drop in workforce numbers was reported, companies primarily attributed it to a prolonged period of weak underlying demand, alongside expectations of subdued spending patterns among clients over the months ahead.
All nine English regions recorded higher input prices during October, and the majority of these indicated an accelerated pace of inflation compared to the previous month. Survey respondents mostly cited rising costs for fuel, energy and raw materials. The fastest rate of cost inflation was in the South East, and the slowest was recorded in the East Midlands. Meanwhile, prices charged by private sector firms increased only marginally across the English regions in October, and in each case at a weaker pace than input costs. As has been the case throughout 2012 to date, companies suggested that strong competition had limited their ability to pass on higher input prices to clients.
David Oldfield, MD Commercial, Lloyds Banking Group, said: “October’s survey suggests a loss of business output momentum across the English regions since the summer, with London in particular seeing a much more subdued performance than in recent months.
“The slowdown in business activity, alongside uncertainty about the global economic outlook,was also reflected in slight declines in private sector employment since September. Despite a challenging economic backdrop, there are signs that local businesses are defying the winter blues. The survey’s data on new orders shows that firms are still successfully pursuing opportunities for growth both at home and abroad.
“This widespread continuation of new business growth is especially encouraging given that local firms are having to cope with greater pressure on operating costs from higher prices for fuel and