Business growth eases in SW

Private sector activity in the South West continued to rise in May, according to the latest PMI® survey data.

The rate of expansion remained relatively strong but eased to the weakest since February, mainly reflecting the slowest growth of new business since April 2013. Charges for goods and services rose slightly, having declined in March and April, but overall inflationary pressures remained weak.

The seasonally adjusted Lloyds Bank Commercial Banking South West Business Activity Index fell for the second consecutive month to 55.1 in May, from 56.0 in April, indicating the weakest rise in private sector output since February. That said, growth remained stronger than the long-run survey average and was only slightly below the UK average.

Sector data signalled a further moderation in the rate of manufacturing production growth, and also a slower rise in services activity. Services continued to expand at a faster overall rate than manufacturing.

The slowdown in growth of private sector output in May was mainly influenced by a modest rise in new business. The rate of expansion in new work slowed to the weakest since April 2013. Manufacturing new orders continued to fall.

May survey data indicated a slight acceleration in inflation of average input prices faced by private sector firms, to the fastest since February. Input cost inflation remained weak overall, however, and the South West saw a slower rise in cost pressures than the UK as a whole. Moreover, input prices in manufacturing continued to decline.

Prices charged for goods and services rose in May, having declined in the previous month at the fastest rate since August 2009. The latest increase was only marginal, however.

The rate of employment growth remained sharp in May. Workforces expanded for the twenty-sixth consecutive month, and at a stronger rate. Job creation remained broad-based by sector. Meanwhile, backlogs of work rose marginally.

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:

“The South West saw a further loss of momentum in May, and the slower rise in new work suggests that June could see a further slowdown in the rate of output growth. The region is not alone in this regard, however, as the rate of expansion across the UK as a whole has also moderated in the second quarter of the year. The resumption of output price inflation in the South West is a positive highlight from the latest survey, suggesting that the risk of deflation setting in has diminished, while the labour market remains strong.”