New surveys suggest economy strengthens after ‘blip’ in April
A FALL in business activity in the West Midlands during April may be just a “blip” as new surveys have raised fresh hope of a recovery in the national and regional economies.
New studies by Lloyds TSB and the CBI both suggest activity levels will improve during the current quarter and into the second half.
The latest Lloyds TSB West Midlands Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – shows business activity declined marginally in April compared with March.
However, Dave Atkinson, area director for Lloyds TSB Commercial Banking in the West Midlands, said a solid rise in levels of incoming new business offered encouragement that the monthly performance could be a blip.
He said employment levels had risen at their fastest pace since last August, highlighting a rise in confidence among the region’s companies over business prospects in the months ahead.
Meanwhile, the CBI has suggested the UK economy will continue to grow throughout this year, with GDP growth expected to pick up in 2014.
The Lloyds index showed regional activity stood at 49.8 last month, down from 50.0 in March. The grading is the first sub-50 reading since last November. Normally any reading below 50 suggests decline.
However, those compiling the report there were reasons to be optimistic as new business had continued to rise at a solid pace. Work backlogs fell at the slowest rate in 11 months and employment growth accelerated at its strongest since last August.
The report shows output at West Midlands private sector firms was down fractionally in April. This contrasted with an acceleration in growth of business activity across the UK as a whole. Data showed that an expansion of activity in the service sector was offset by declining manufacturing output.
The slight fall in output occurred despite another increase in the level of new business placed with West Midlands private sector firms during April. The latest rise in new work was the sixth in consecutive months and at a similar pace to the UK average. Higher new business in the service sector contrasted with a drop in new orders placed with manufacturers.
Employment in the private sector increased further in April, extending the current period of expansion to four months. Furthermore, the rate of jobs growth quickened to the fastest since last August.
Input prices faced by companies continued to increase in April. The rate of cost inflation was solid, despite easing to a four-month low. Sector data showed that service providers registered stronger cost rises than manufacturers.
Output prices increased for the sixth month running in April, but the latest rise in charges was only marginal and weaker than in the previous month.
“Business activity in the West Midlands was down fractionally in April, mainly due to a wider slowdown in the manufacturing sector across the UK. Despite this, a further solid rise in levels of incoming new business provides encouragement that this could simply be a blip. Employment levels also rose at the fastest pace since last August, highlighting a rise in confidence among the region’s companies over business prospects in the months ahead,” said Mr Atkinson.
The CBI is forecasting GDP growth of 1% in 2013, unchanged from its previous forecast after official first quarter figures came in line with its expectations. Quarter-on-quarter growth is expected to gather pace gradually, with growth of 0.3% predicted for the second quarter, 0.4% in the third and 0.4% in the final quarter of 2013.
In 2014, the industry body is expecting growth of 2%, with quarter-on-quarter growth to range between 0.5% and 0.6%.
Richard Butler, Director, CBI West Midlands, said: “The UK economy is moving from flat to growth. Although recent data suggests rising business confidence, the economic climate remains tough, hampering demand here and overseas. Meanwhile, consumers remain under pressure, as inflation continues to outstrip wage growth.
“Now the Government needs to pick up the baton and deliver on promises to get finance to firms, cut red tape and help drive up exports.”
The CBI is also forecasting that unemployment will see a small rise in 2013 to 2.58m before receding slightly to 2.51m in 2014. However, the rate of unemployment in the West Midlands still remains well above the UK average.
