The Markit South West PMI signalled further growth of the region’s economy during October.
The rise in output accelerated since September, as new order volumes returned to growth. There were also signs that excess capacity at south west firms was easing. The reduction in backlogs was slower than that indicated by the historical average for the series, and the pace of job cuts was at its lowest in a year.
The headline seasonally adjusted Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – posted 58.3 in October, from 55.1 in September.
Companies operating within the south west reported a robust rise in new order volumes during October. This was the second-highest rate of growth in new business recorded over the last 19 months, and represented a rebound from the fall in new orders reported in September.
A sixth successive rise in output was posted in October, stimulated by new order growth which resulted from an upturn in demand. The pace at which activity increased continued to outstrip the rise in new orders and was the fastest in twenty-five months.
The reduction in backlogs eased markedly in October. Moreover, it was slower than the historical average for the series for only the second time in the last 18 months. Some service sector panellists noted a rise in long-term contracts, which partially offset the continued fall in outstanding business indicated by respondents in the manufacturing sector.
The rate at which jobs were cut eased in October to its slowest in 12 months. Redundancy programmes remained prevalent in the region, but some companies reported that they were starting to hire new staff in response to new order gains.
Input costs rose during the month, driven by higher fuel costs, raw material prices (particularly for oil and plastic) and unfavourable exchange rate variations. October marked the tenth month of successive input price rises within the region.
High levels of competition within the south west meant that output prices fell for an eighth successive month in October. However, the pace of reduction was fractional, and the slowest in that period. The extent to which output prices decreased was limited, as some panellists noted that higher costs prevented substantial price discounting.
Commenting on the Markit South West PMI survey, Sarah Ledger, Economist at Markit, said:
“The expansion of the South West economy was marked in October. However, more importantly, there was growth in new order volumes following a reduction in September. This provided hope that the recovery in business conditions will be more sustainable over the coming months. Furthermore, there were signs that the worst of the labour market downturn had passed, with job cuts at their lowest in a year.”