Output slows but no one pressing the panic button – PMI report

OUTPUT growth was at a six-month low in the West Midlands but still above the UK average, latest figures have shown.

Backlogs of work in the region fell during the month as new business growth began to ease, the latest Lloyds Bank Commercial Banking West Midlands PMI report shows. The report also highlights that employment rose at its weakest rate in 15 months.

The figures are an indication of an economy levelling off after an unprecedented period of growth, albeit one from a very low base.

The results were expected because of the survey-record high in March, which analysts had warned would be impossible to sustain over a prolonged period.

Backlogs of work declined during the month, while there was a weaker rise in employment. Input and output prices both increased at slower rates.

The Lloyds Bank Commercial Banking West Midlands Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – posted 58.2 in March. Although down from February’s 62.2, this was still strong – any figure over 50 suggests a growing economy.

The 58.2 figure was the lowest recorded since last September. Nevertheless, it remained above the equivalent index for the UK as a whole. Output growth was led by the manufacturing sector, although service providers also signalled a robust expansion.

The trend in output mirrored that for new business during March. Although still strong, the rate of growth in new orders was down on February’s record high to the slowest in five months.

Staffing levels at West Midlands private sector companies increased for a 15th consecutive month during March. However, the rate of growth eased to a marginal pace, well below the UK average. Manufacturers indicated a sharper increase in payroll numbers than service providers.

Outstanding business in the West Midlands private sector decreased for the first time in eight months during March. Although modest, the drop in backlogs contrasted with growth across the UK overall.   

The rate of input price inflation in the region’s private sector eased to a 19-month low in March. The latest rise in costs was modest and weaker than the UK average.

Output prices also rose at a slower pace, with the latest increase the weakest since August 2013.         

Despite the figures, no one is pressing the panic button.

Commenting on the results, Dave Atkinson, area director SME Banking in the West Midlands, Lloyds Bank Commercial Banking, said: “Activity growth may have eased from a record high in March, but it remained strong and above the UK average. The West Midlands continue to benefit from robust increases in new business, although there remains little pressure on capacity, with backlogs of work falling in the latest month. Accordingly, employment growth weakened to a 15-month low.”