Private sector output rises despite new business slowing

PRIVATE sector output in the West Midlands continued to rise during November but the overall picture remains difficult. New PMI figures show the rate of expansion was solid and slightly quicker than in October, despite new business increasing at the slowest pace in four months.

However, employment fell for the first time in 14 months, although the rate of decline in employment was modest and weaker than that registered across the UK overall. This contributed to a weaker decline in backlogs of work.

Input price inflation eased to its lowest since September 2009, while output charges rose only modestly.

Last month’s Lloyds TSB West Midlands Business Activity Index – which tracks the combined output of the region’s manufacturing and service sectors – recorded a rate of 53.8, up from 53.4 in October. This points to a solid rate of growth that was the second-strongest across all UK regions in November.

Activity growth accelerated despite a weaker rise in new business received by West Midlands companies during November. The latest increase in new orders was the slowest in four months, although the pace of growth remained above the UK average.

Backlogs of work continued to fall in November, as has been the case in each of the past 10 months. However, the rate of contraction eased to the slowest since June.

The rate of input price inflation in the West Midlands private sector moderated further during November, reaching its lowest since September 2009. There were a number of reports linking weaker cost inflation to reduced steel prices. The region posted a slower rise in input prices than the UK average.

Prices charged by West Midlands private sector companies continued to increase during November, in line with the trend recorded throughout the past two years. However, the rate of charge inflation remained modest and below that signalled for input costs.

David Garbutt, area director for Lloyds TSB Commercial in the West Midlands, said: “The West Midlands continued to outperform most other UK regions in November, showing further solid output growth. However, employment fell for the first time in 14 months, suggesting a degree of uncertainty among companies over business prospects. Cost inflation decreased to its lowest for over two years, which will ease pressure on profit margins and may provide scope for some discounting in coming months if demand begins to falter.”