Increase in south west output

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South West PMI data signalled further expansion of business activity within the region during December.

The headline seasonally adjusted Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – posted 54.2 in December, down from 56.1 in November. Readings above 50.0 signal expansion and those below 50 indicate contraction.

Increased private sector output has now been recorded for eight consecutive months, but the latest rise was slower than the UK average and the weakest since June. Growth of business activity was registered in both the manufacturing and service sectors in December.

Higher levels of incoming new business were the main factor leading to increased output in December. New order growth has been recorded in seven of the past eight months, although the rate of expansion was only moderate in December and less marked than the UK average.

Outstanding business at south west companies fell further in December, which survey respondents generally linked to spare capacity and relatively weak underlying demand. However, the latest reduction in backlogs was only marginal and the slowest in the current 28-month period of decline.

Job shedding was recorded again in December, largely reflecting ongoing adjustments to spare capacity and efforts by firms to reduce costs at their units. This extended the current period of declining staffing levels to twenty-one months, but the latest fall was the least marked since May 2008.

Input cost inflation was the highest for fourteen months in December and remained stronger than the UK average. The manufacturing and service sectors both recorded increased cost burdens, which some panel members attributed to higher fuel prices.

December data indicated a slight fall in prices charged by South West firms, which they generally linked to efforts to stimulate sales. There were also a number of reports that strong competition continued restrict operating margins in the region.