Private sector ends 2015 on a positive note

The South West private sector economy ended 2015 on a positive note, according to December PMI® survey data. Output growth accelerated from November’s subdued pace to the strongest since July, while new business rose at the fastest rate since June.

Moreover, backlogs grew for the first time in seven months, and at the sharpest pace since January 2015. Firms continued to expand their workforces and reported higher input prices for the first time in five months, leading them to raise their own charges.

The seasonally adjusted Lloyds Bank Commercial Banking South West Business Activity Index rose to a five-month high of 54.5 in December, up from 52.2 in November. The latest figure signalled a solid rate of expansion in private sector output in the South West, and one that was slightly stronger than the long-run series average (54.1). That said, the rate of growth remained below the trend pace achieved over the current 33-month sequence of increases (56.9). The South West also under-performed relative to the expansion seen across the UK as a whole, a trend that was evident throughout much of 2015.

The rate of growth of incoming new business also strengthened in December, reaching the fastest since June. As with total business activity, however, the rate of expansion remained weaker than the UK average.     

Faster growth of new work led to a build-up in outstanding business in the South West private sector in December. Previously, backlogs had fallen continuously since June. Moreover, only London registered a stronger accumulation in work-in-hand than the South West. 

Backlogs rose despite another increase in employment, which took the current sequence of job creation to 33 months. The rate of workforce growth was moderate, however, and among the weakest registered across the 12 UK regions covered.

December data indicated upward pressure on firms’ costs, with input prices rising for the first time in five months. This mainly reflected greater labour costs in the service sector, as manufacturing purchase prices continued to fall. Greater cost pressures were transferred to customers during the month, as highlighted by higher tariffs.

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:  “Growth in the South West recovered at the end of 2015, with December seeing the strongest gain in output in five months. That said, the last three months saw the slowest increase since Q2 2013, and the region remains among the weakest in the country. Despite this, the South West registered a comparatively strong rise in outstanding work, hinting at capacity constraints in the region.”