Lloyds Bank Regional PMI - Business activity growth in England and Wales slows

08 June 2015

  • Business activity growth in England remains positive albeit at slowest pace in 2015 so far
  • Wales sees slight slowdown in growth but expansion continues at a strong pace
  • Job creation stayed positive including a record rise in Wales
  • Inflationary pressures re-emerge as firms’ costs accelerate triggering higher charges for goods and services

Business activity increased across all English regions and Wales in May but at a slower rate than April in the majority of cases, according to the latest Lloyds Bank Regional Purchasing Managers’ Index® (PMI®). While growth generally remained strong, including further job creation, there were early signs of inflationary pressures returning last month.

Business activity in England rose at a solid rate in May to 55.9, but was the joint-weakest recorded over the past two years. The index was down from April’s 58.5 though still above its long-run average of 54.2. Any reading above the 50.0 ‘no-change’ mark indicates growth.

At 59.7, the North East saw the fastest rate of growth across England last month, down from 62.4 in April. The next-fastest increase in activity was recorded in the East of England (57.8) where the pace of expansion hit a four-month high, and a sharp increase in output was also seen in London (57.0).

Wales outperformed the combined English regions, with its corresponding business activity index reaching 58.6 in May (the second-highest overall in the latest survey period behind the North East). This was in line with its average over 2015 so far, albeit the lowest for three months.

Employment growth slowed in six regions, although it generally remained strong in the context of historical survey data. The exceptions to the slowdown were the East of England – which recorded the fastest overall rate of job creation for the second month running (59.5) – as well as the South West (55.9) and London (55.6). Wales also bucked the general trend with a record rise in staffing numbers (56.7).

The prices charged by firms for goods and services across England and Wales rose in May, the former having seen a slight decline the previous month. This was as a result of cost pressures picking up, with input price inflation accelerating amid reports of oil price rises driving up some material costs, and higher staff pay.

Tim Hinton, Managing Director, Mid Markets and SME Banking, Lloyds Banking Group said: “It’s encouraging to see positive growth and solid improvements in business performance during May. While there has been a slight slowdown in economic growth and a re-emergence of inflationary pressures, the overall outlook is strong for the UK. Businesseshave good reasons to remain confident and should continue to invest in their growth ambitions.”