West Midlands economy shows dramatic improvement in January

THE economy of the West Midlands saw a dramatic improvement in January with a marked expansion in both output and new orders plus the strong rise in employment since the summer.

The data contained in the latest Lloyds TSB West Midlands PMI report will make encouraging reading following last month’s disappointing GDP survey which showed a 0.5% fall during the final three months of 2010.

Commenting on the PMI survey, Andy Youngman, area director for Lloyds TSB Commercial in Birmingham, said: “The West Midlands economy saw a further strengthening of growth in January, primarily driven by a buoyant manufacturing sector.

“Rising activity levels are starting to feed through into sustained job creation in the region – employment rose at the fastest rate for seven months – indicating that the recovery is gaining traction.”

The index, which measures the combined output of the region’s manufacturing and service sectors, posted 57.8, up from 56.8 in December, to signal the strongest rise in output for nine months.

Activity growth was supported by a further expansion of new business, which increased at the fastest pace since last February. Backlogs of work rose slightly, encouraging firms to raise staffing levels at a sharper rate.

However, the report notes inflationary pressures intensified during the month with input and output prices both increasing at a stronger pace.

Elsewhere, activity levels at West Midlands private sector firms increased at a marked and accelerated rate in January – sharper than that recorded across the UK as a whole.

The manufacturing sector remained the principal driver of expansion, as service providers continued to report a subdued trend in activity.

Higher output was attributed to another increase in new business and the growth of new work accelerated to its strongest level since last February, primarily reflecting a robust expansion of new orders placed with manufacturers.

Client stock building and new product launches were seen as factors underpinning sales growth.

Higher new business volumes contributed to a rise in backlogs of work at West Midlands firms during January.

Correspondingly, employment growth in the region strengthened as staff were hired to deal with rising workloads.

Job creation picked up to the fastest pace in seven months and was well above the UK average.