October data from the South West PMI (Purchasing Managers Index) signalled a solid expansion of the South West private sector economy, with the seasonally adjusted Business Activity Index posting 54.2. This was broadly unchanged from September’s reading of 54.1.
Growth in new business volumes continued to support the overall rise in activity, and subsequently employment. However, the improvement in the health of the region’s economy remained largely driven by a stronger manufacturing sector, with service companies still lagging. Meanwhile, input costs rose sharply during the month, but output prices fell amid strong competition for new business.
Business activity in the South West increased solidly during October, with growth now sustained for a year-and-a-half. Moreover, the latest rise was stronger than that indicated for the UK as a whole.
Output increased following a further rise in new business received by companies in the South West. The latest expansion in new orders was the fastest in three months, although continued to be predominately driven by the manufacturing sector.
October data signalled a further reduction in backlogs of work at companies in the South West. However, the rate of depletion eased to the weakest in six months, and was slower than that indicated for the UK as a whole.
Reflective of the sustained growth in new orders, employment in the region increased during October, and at a modest rate. The rise in staffing levels was predominately driven by the region’s manufacturing sector, with service companies indicating a fall in headcounts.
Input prices faced by companies in the South West increased markedly during October. However, the rate of input cost inflation slowed slightly during the month, and was weaker than that indicated for the broader UK economy.
Despite the rise in costs, output prices fell during the month. This was the first reduction in charges since January, with anecdotal evidence suggesting that strong competition for new business had led to the decrease.
Commenting on the South West PMI survey, Shane Vallance, Economics and Evidence Manager at South West RDA, said: “This latest survey suggests the moderate recovery is being maintained in the region. The growth in new orders is to be particularly welcomed. However, it is clear that our businesses remain under considerable cost pressures, reflecting the strong rise in global commodity prices. This will affect profitability in the more competitive markets.”
