Lloyds Bank

Output growth remains subdued in May

13 June 2016

  • Output continues on weak growth path as inflows of new business move closer to stagnation
  • England sees one of slowest rises in activity for three years; growth in Wales at 45-month low
  • Employment increases only marginally as slowdown in hiring continues

Output growth remained subdued across England and Wales in May, according to the latest Lloyds Bank Regional Purchasing Managers’ Index® (PMI®). The weakness reflected a deteriorating trend in the flow of incoming new work, with job creation slowing as a result.


The business activity index for England – which tracks changes in the combined output of the manufacturing and service sectors – registered 53.3 in May, up from April’s 37-month low of 52.1, but still signalling one of the slowest rises in output over the past three years. Indeed, the index’s average for the second quarter so far (52.7) is the lowest since the first quarter of 2013.


Business activity rose across eight of the nine English regions monitored by the survey, led by the East Midlands (55.4) and Yorkshire & Humber (55.1). However four regions recorded slower growth, and output fell in the North East (48.5) for the third month running and at the fastest rate since March 2013.

Subdued growth in overall business activity was partly a reflection of a weaker trend in the flow of incoming new work, which showed the slowest rise since February 2013 across England as a whole.


Wales’ private sector economy lost further momentum in May, with output growth at a 45-month low and new business moving closer to stagnation.


On the employment front, May saw the pace of job creation slow across England to the lowest for three years amid reports of the National Living Wage impacting on hiring. Staffing levels were broadly unchanged in the South East, while Yorkshire & Humber saw a further decline. Wales, on the other hand, recorded the strongest rise in employment in five months, albeit moderate.


Elsewhere, the survey showed a slightly faster rise in average prices charged for goods and services in May, with cost inflation running close to, but slightly below, April’s recent high.

Tim Hinton, Managing Director, Mid-Markets and SME Banking, Lloyds Banking Group said:
“The UK economy is showing signs of slowing in the second quarter, with trends in output and employment growth at their lowest in three years. Increased uncertainty in the domestic market and hesitancy among firms’ clients to commit to new projects are influencing factors, reflected in the slowest overall rise in new orders since 2012.”


“Geographically, the East Midlands and Yorkshire and Humber held up best, whereas activity fell for the third consecutive month in the North East."


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