English regional Purchasing Managers’ Index™ (PMI™) data for August indicated a widespread moderation in private sector output growth, largely reflecting another slowdown in new business gains. Highlighting the broad-based loss of momentum, overall business activity across the English regions increased at the slowest pace for thirteen months.
Concerns about a faltering recovery in business activity, alongside reduced inflows of new work, had a negative influence on regional labour market conditions in August. Latest data pointed to a retrenchment of workforce numbers in the majority of regions, with the East Midlands and London posting the fastest declines.
Output and demand
Eight of the nine English regions registered an expansion of private sector output during August, but in each case the rate of growth slowed since July. The North West, South East and East of England saw particularly marked slowdowns, with the rates of expansion easing to sixteen, fourteen and seven-month lows respectively.
Meanwhile, London was the worst performing region in August. Business activity in the capital was unchanged since July, thereby ending a fifteen-month period of continuous growth.
In line with the trend for business activity, latest data showed a moderation in new order growth across the majority of English regions, especially the East Midlands and the South West. Only the North East posted an acceleration of new business growth in August, and the pace of expansion was the fastest rise of all English regions. In contrast, London registered a decline in new work for the first time since June 2009.
Employment and backlogs
August data pointed to broadly unchanged staffing levels in three English regions, while five regions posted a decline in private sector workforce numbers. The North East recorded an increase in employment, but the rate of expansion remained only moderate. In contrast, the East Midlands saw the fastest pace of job shedding, ending a five-month period of employment growth in the region. Lower levels of employment were commonly linked by survey respondents to excess capacity at their units. Highlighting this, backlogs of work declined in eight of the nine broad regions monitored by the survey in August.
Input and output prices
Higher average input costs were signalled in all nine English regions during August, as has been the case in each month since October 2009. The fastest rates of input price inflation were in the North West and the North East. Meanwhile, cost burdens continued to rise only marginally in London, with the capital again recording the slowest rate of inflation of all regions. Companies that reported higher input prices generally pointed to increased raw material and transportation costs.
Prices charged by private sector firms increased in all regions except Yorkshire & Humber. August data indicated that the steepest rates of output charge inflation were in the North West and the East of England. Nonetheless, anecdotal evidence suggested that difficult operating conditions and subdued client demand continued to put pressure on pricing power the latest survey period.
Speaking on behalf of all RDAs, Nigel Jump – Chief Economist for the South West RDA, said: “This month’s survey results show more softness and raise concerns about the strength of the recovery. The growth in new orders was the weakest since the summer last year and many areas are now seeing a return to net job shedding. The fact that this is happening more quickly in London and the South East than elsewhere is an unwelcome signal for us all.”
