Regional private sector growth in activity continued to slow in June, according to the Lloyds TSB South West Business Activity Index.
Having been the strongest-performing UK region at the start of 2011, the South West was one of the weakest at the end of the second quarter. This was led by a near-stagnation of new order levels, particularly within manufacturing. Staffing levels continued to rise in June, but the pace of job creation lost momentum amid a further reduction in backlogs of work.
"Nonetheless," insisted Dave Atkinson, area director for Lloyds TSB Commercial in Gloucestershire, "this should help to support consumer demand in the region.”
Overall PMI survey data pointed to a 26th consecutive monthly rise in business activity in the South West, according to Lloyds' seasonally adjusted index which measures the combined output of the region’s manufacturing and service sectors. However, the rate of growth slowed from 51.1 to 50.8, the weakest in the current sequence of expansion. The relatively mild rise in output reflected weaker new business growth seen in recent months.
Despite a further depletion of backlogs of work, employment rose again in June. Cost inflation has slowed since May but output prices
rose at the fastest rate in three months. Incoming new business increased marginally during June – the rate of
expansion was slightly stronger than in May, but was below the long-run regional trend and for the UK as a whole. Subsequently, the rise in output slowed for the third month running and was only marginal. Growth of activity was largely restricted to the manufacturing sector in June, with service providers noting a fall in output.
Companies in both the manufacturing and service sectors recorded decreases in outstanding business. Nonetheless, employment rose for the 10th month running, albeit at a marginal rate. While manufacturers reported a marked increase in staffing levels, jobs were cut at service providers on average due to weak activity.
Input costs faced by companies in the South West continued to rise at a substantial rate during June, driven by higher raw material and commodity prices. The rate of cost inflation slowed since May, but remained strong in the context of historical data and above that indicated for the wider UK economy. Output prices rose for the eighth successive month in June, as companies aimed to pass on higher costs to clients. Moreover, the rate of charge inflation accelerated to a three-month high. Nonetheless, the pricing power of service providers remained restricted, with only manufacturers able to increase output prices on average.
