The November Markit index of private sector purchasing managers (PMI) in the South West has recorded the eighth successive month of growth in output, but the pace of growth has slowed in contrast to the UK as a whole.
The South West PMI is based on original survey data collected from a sample of the region’s private sector businesses.
Having led the UK regions out of recession, the index suggests the rate of recovery in the SW, while still positive, has levelled off in the latest couple of months. This contrasts with other, more export-orientated, UK regions.
The level of outstanding business was still contracting in December but only marginally so. Companies reporting a drop in order backlogs cited spare capacity and subdued levels of demand. The survey results for new orders remained positive but with only moderate growth in incoming new business in contrast to rather more vigorous rate of gain for the UK as a whole.
The majority of firms surveyed reported no change at all in employment levels over the previous month. The 10 per cent of companies that reported higher employment were outweighed by the 17 per cent who were losing staff. As a result, overall private sector employment continued to decline for the 21st consecutive month.
The survey results remain consistent with our understanding of the South West economy. As a region we are less exposed to the sectors that have been most adversely affected by this recession: manufacturing exports and business and financial services. As a result, we would expect other regions to show stronger growth now as these sectors start to recover.
It is also not surprising that firms continue to shed labour on balance as the overall fall in employment has lagged the fall in output. Although SW firms are getting enough new orders to be increasing production this is not yet strong enough to halt the continuing fall in orders in hand.
This leaves firms very exposed to any renewed fall in demand if the recovery stalls and is not creating the conditions for firms to invest in increasing either productive capacity or employment.
