SW output decreases

Private sector output in the south west has contracted for the first time in 28 months, according to latest PMI survey data.

The Lloyds TSB South West Business Activity Index, which measures the combined output of the region’s manufacturing and service sectors, posted 48.1, down from 50.7 in July. Furthermore, the month-on-month contraction was the first recorded since April 2009.

While a marginal expansion of new business was recorded, the rate of growth slowed. The weaker rise in new orders was the main contributor to the decrease in output.

Evidence of spare capacity persisted, with a sharper depletion of backlogs and decline in employment recorded. Meanwhile, charge inflation accelerated again, remaining notably stronger than the UK average.

Input costs continued to rise sharply, albeit at a slightly slower rate than in July. Growth of new work received by companies in the south west slowed in August from July’s three-month high.

The expansion was below the long-run trend for the series and weaker than the UK average.

Subdued confidence and destocking at clients were cited as having contributed to the weaker rise in new business. Output declined in response, in contrast to growth across the UK overall.

August data signalled a fifth successive reduction of outstanding business at companies in the region. The latest depletion was the fastest for almost two years, suggesting a greater degree of excess capacity.

Employment fell during August, ending an 11-month period of growth. Job cuts were centred on the service sector, whereas manufacturers continued to add jobs.

Input costs faced by companies in the south west increased for a thirty-second successive month in August.

The rate of input price inflation slowed to the weakest since November 2010, but remained strong in the context of historical data. Anecdotal evidence suggested that higher raw material prices, as well as increased fuel and wage costs, had led to the rise in input prices.

Output charges rose again, and at the strongest rate in six months. While panellists in both the manufacturing and service sectors noted an increase in selling prices, manufacturers registered the sharper rise.