SW orders stagnate

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The rate of growth in the south west private sector slowed down in September, according to the latest Markit South West PMI Survey.

Incoming new business stagnated in September, while backlogs continued to decrease. This was indicative of sustained spare capacity, and further highlighting this was a continued fall in employment levels.

However, September figures were still much improved relative to that recorded at the start of 2009, although highlighted the fragility of the early stages of economic recovery.

Incoming new business received by south west private sector companies was broadly unchanged during September, ending a four-month period of growth. This was in contrast to the wider UK economy, where increased order volumes were recorded for the third successive month. The service sector posted a decline in new order volumes, with manufacturing recording a rise.Despite the overall stagnation in new orders, output rose markedly in September, and faster than the UK average.

Backlogs were subsequently reduced during September. The rate of decline in outstanding business was marginally slower than that recorded for the wider UK economy and remained fast in the context of historical data.

Indicative of the current spare capacity prevalent within the region, employment levels fell further in September. Those firms that registered job shedding frequently linked this to restructuring initiatives and the non-replacement of leavers.

Inflationary pressures on input prices continued in September, with the rate of increase in costs accelerating since August. Higher prices for oil-related products were cited as key sources of inflationary pressure in September.

The pricing power of companies operating within the south west remained low. Output prices fell for the seventh successive month as competition for business remained strong. Both the manufacturing and service sectors reported reduced charges and increased input costs, therefore squeezing margins.

Commenting on the data, Sarah Ledger, economist at Markit, said: “The rate of growth in business activity experienced in the south west over recent months continued to ease during September. Whilst activity in the region increased faster than the average recorded for the wider UK economy, the stagnation in new order volumes compounded excess capacity.

“Unless incoming new business regains growth in the coming months, there is likely to be no let-up in job cuts.”

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