Job growth amid sustained expansion of SW economy

May 11, 2010
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South West PMI data has signalled further growth in business activity, with the pace of expansion in April broadly unchanged from the previous survey period. The headline seasonally adjusted Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – posted 56.0 in April, from 55.9 in March.

The manufacturing sector predominately drove the strengthening in business conditions, as output growth in the region’s service sector was still modest. Nonetheless, overall employment rose for a second successive month and at the fastest pace since March 2008. Meanwhile, input cost inflation gathered pace, but strong competition led to only a slight rise in output prices.

Business activity in the South West increased in April for a twelfth successive month. The rate of growth was broadly unchanged since March, and remained slower than that reported for the UK as a whole. However, expansion of business activity in the UK weakened during the month.

Incoming new business received by the region’s firms increased markedly during April. Higher new orders received by manufacturers supported the overall rise in work, with service sector panellists reporting a marginal reduction in new business.

April data signalled a second successive rise in employment in the South West. Moreover, staffing levels increased at a solid pace, and the rate of growth was faster than that recorded for the broader UK economy.

Outstanding business reduced at its weakest pace in the current 32-month period of contraction. The region’s service sector predominately contributed towards the decline, with manufacturing companies reporting a rise in backlogs. This reflected the expansion in new orders seen in the manufacturing industry, alongside delays obtaining certain raw materials.

April data signalled a substantial rise in input costs faced by companies in the South West. Rising fuel and raw material prices, particularly for metals, drove input cost inflation, which was at its strongest since September 2008. Panellists in both the manufacturing and service sectors reported a rise in input prices, although this was more marked in the former.

Reflective of the sustained rise in input costs, output prices were increased during the month. However, the rate at which charges rose was modest, and the slowest during the current three-month period of rising output prices. Anecdotal evidence suggested that strong competition prevented a greater increase in charges.

Commenting on the South West PMI survey, Sarah Ledger, Economist at Markit, said: “Growth of the South West economy has now been sustained over the course of twelve months. Whilst the latest increase in activity continued to be led by the region’s manufacturing sector, it is encouraging that an overall expansion appears to be taking hold. Reinforcing this, employment rose for a second consecutive month, which will help to lift consumer demand in the South West.”

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