South West growth slowest in a year-and-a-half in October

The private sector economy of the South West registered ongoing growth of output, new business and employment in October.

That said, the pace of expansion in total business activity moderated to the weakest since April 2013, and was the slowest among 12 UK regions monitored. Unlike the trend shown across the UK as a whole, manufacturing outperformed the service sector in growth of output, new business and employment during the month.

The seasonally adjusted Lloyds Bank Commercial Banking South West Business Activity Index remained consistent with growth of private sector output at the start of the final quarter. The Index fell to 52.5, however, from 54.7 in September, indicating the weakest rate of expansion in 18 months. It was also the slowest growth of any UK region monitored. 

The South West’s position at the bottom of the UK regional growth rankings in October was primarily the result of a lacklustre service sector performance. Activity rose at a modest pace, outstanding business fell and charges were reduced. In contrast, manufacturing output and new orders maintained sharp rates of growth.

The total volume of new business rose for the 19th month running. The rate of growth was sharp in the context of historic survey data, but eased for the fourth successive month to the slowest since June 2013.

New business growth remained sufficiently strong to generate a further rise in employment in October. Manufacturers continued to expand workforces at a notably sharp pace.

The volume of new work continued to rise at a sharper rate than output in October, resulting in higher backlogs. Outstanding business has now risen 14 times in the past 16 months, although the latest increase was only modest.

Inflationary pressures in the South West private sector remained relatively subdued in October, despite the rate of input price inflation picking up to a three-month high. Prices charged rose only 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 found itself at the bottom of the UK regional growth table in October, with business activity rising at the slowest pace in a year-and-a-half. This was mainly a reflection of a lacklustre performance by the service sector, as manufacturing output grew more sharply than the UK average. The rate of new business growth remained stronger than the pace of output growth, however, suggesting that private sector activity may regain momentum in the coming months.”