Business activity slows but West Midlands still outstrips rest of UK

Output in the West Midlands economy continues to outstrip the rest of the UK – even though it fell back last month following a strong start to the year.

The latest Lloyds Banking Group West Midlands Purchasing Managers’ Index (PMI) posted 57.0 in February, down from 60.1 in January but still the highest of all the UK regions covered in the report. Any reading above 50 signifies expansion in business activity.

Despite the decline last month, the index shows firms in the region took on new staff at the highest rate since April 2015.

The report concludes job creation was sustained by further marked growth in client demand, albeit order books rose at a slightly slower rate than in January.  

One negative was rising inflation, which continued to squeeze firms’ input costs. These costs – which include staff wages and raw materials – rose at the fastest rate for almost six years (70 months). Equally, the prices firms charged for products and services increased to the greatest extent since August 2008.

The Lloyds Bank PMI is based on responses from manufacturers and services businesses about the amount of goods and services produced during February compared with the previous month.
 
Mark Cadwallader, regional director for the West Midlands, Lloyds Bank Commercial Banking, said: “The West Midlands maintained its position as the best performing UK region as measured by growth of both output and new business being secured in February.
 
“But despite such a positive picture for the local economic landscape, strong inflation pressures created by the weak pound ¬continued to cause concern.
 
“It may be the case that the slight slowdown in client demand was partly reflective of the biggest increase in average selling prices in eight-and-a-half years. Should this trend continue, then the growth in business activity may continue to slow in the months ahead.”