Growth rates for output and new business pick up in March

The South West private sector economy registered a faster increase in output in March, according to the latest PMI® survey data.

This was accompanied by a stronger gain in incoming new business, a rise in backlogs of work and sharper job creation. The latest survey results also signalled weaker price pressures, as input price inflation slowed and firms’ charges were broadly unchanged from one month previously.

The seasonally adjusted Lloyds Bank Commercial Banking South West Business Activity Index recovered most of the ground lost in February, rising to 57.5 in March from 54.8. That signalled the fastest rate of expansion since January. Over the first quarter the Index averaged 56.8, the highest since Q3 2014 and well above the long-run survey trend of 54.1. That said, growth remained weaker than the UK average.   

The volume of new business received by South West private sector companies rose for the twenty-fourth consecutive month in March, and at a stronger rate. As was the case for output, this reflected expansion in the service sector, as manufacturing new orders fell.

Increased pressure on capacity was evident in March as the volume of outstanding business rose, following a slight decline in February. The rise in backlogs occurred despite a faster rate of job creation during the month, the strongest since January 2014. Moreover, employment in the South West rose at a faster rate than the UK average.

Price pressures in the South West remained relatively weak in March. Input prices increased at a slower rate than in February, with inflation remaining well below the long-run survey average. Cost pressures remained stronger at service providers than at goods producers, with lower input costs at the latter reflecting the weak euro. Meanwhile, private sector firms in the South West held their output charges broadly stable.

Commenting on the Lloyds Bank Commercial Banking South West PMI survey, David Beaumont, area director for SME Banking in the South West, Lloyds Bank Commercial Banking, said: “The private sector economy in the South West regained momentum in March, with output and new business both rising at faster rates. Over the first quarter of the year as a whole, activity increased at a stronger pace than during the final three months of 2014. There was evidence of pressure on margins, as input prices continued to rise while firms held their own charges broadly stable during the month. However, cost pressures remained weak overall.”