Lloyds Bank

Economy slows at end of second quarter

11 July 2016

  • Output growth slows across England but rebounds slightly in Wales

  • London sees business activity decline for first time in over three-and-a-half years

  • England sees slowest rise in employment since early 2013

  • Survey carried out between 13 June and 28 June with the majority of responses given before the EU Referendum result

    June saw a slowdown in output growth across England, according to the latest Lloyds Bank Regional Purchasing Managers’ Index® (PMI®). London saw the biggest fall in business activity across all the regions while weaker job creation also underlined a subdued business environment.

    At 52.5 in June, down from May’s 53.3, the business activity index for England – which tracks changes in the combined output of the manufacturing and service sectors – was close to April’s three-year low, signalling a relatively modest rate of output growth. The index’s average over the second quarter as a whole was the lowest since the opening quarter of 2013.

    The slowdown was largely a reflection of a downturn in business activity in the Capital, with London’s index reading of 48.4, its lowest since April 2009 and the first time that it has gone below 50.0 for more than three and a half years. Anything below the 50.0 figure shows a contraction in business activity.

    The North West of England (55.5) recorded the strongest rate of output growth in June, followed closely by the East Midlands (54.8) and the East of England (54.5).

    Wales saw a slight recovery in business activity growth, with a reading of 53.3 in June, up from May’s 45-month low of 51.5.

    Job creation slowed across England in June, with employment rising only marginally and at the weakest rate since early 2013. There was a quicker pace of hiring in Wales, where job creation reached its highest rate seen in 2016 so far.

    Meanwhile, survey data pointed to another modest monthly rise in average prices charged for goods and services, with the rate of inflation little-changed from that recorded in May. That was despite businesses’ cost pressures intensifying over the month, as input prices increased at a faster rate amid reports of salary pressures as well as higher prices for fuel and other raw materials.

    Tim Hinton, Managing Director, Mid-Markets and SME Banking, Lloyds Banking Group said:

"Growth in the second quarter was at the lowest point in more than three years, with London recording a decline in business activity for the first time since 2012. The increased uncertainty in the period leading up to the EU referendum naturally led businesses to be cautious. Following the outcome of the referendum it is still too early to understand the full impact for businesses across the country.”

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