West Midlands leads the way as business activity rises at strongest rate in nine months

THE latest Lloyds Bank Commercial Banking West Midlands PMI report showed that output growth accelerated at the start of 2016.

Supporting the faster rise in activity was a marked increase in new business.

Nevertheless, firms continued to run down their backlogs of work, while employment growth eased to a four-month low. Input prices fell at the sharpest rate since early-2009, while output charges were lowered modestly.  

The Lloyds Bank West Midlands Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – posted 58.7 in January. Up markedly from 54.7 in December, the latest reading pointed to the strongest rate of expansion in nine months.

Output growth was broad-based across the manufacturing and service sectors, with the latter registering the faster rise. 

Underpinning higher activity was a further increase in new business at West Midlands private sector companies. The latest rise in new orders was the thirty-ninth in consecutive months and sharper than in December.

West Midlands private sector firms continued to add to staffing levels in January, reflective of rising activity. That said, the rate of job creation moderated to a four-month low. Service providers reported a faster pace of expansion in staffing levels than manufacturers.

Workforce growth eased partly as a result of persistent spare capacity at the region’s private sector firms. Backlogs of work continued to be depleted, although the pace of contraction eased slightly since December and was modest overall. 

Mark Cadwallader, area director for SME banking in the Midlands at Lloyds Bank Commercial Banking, said:  “The West Midlands started 2016 with a bang, with output growth accelerating to a nine-month high. Indeed, the region was the best performer across the entire UK.

“Strong new business growth continued to support the expansion, led by demand in the service sector. Meanwhile, firms saw reduced pressure on their margins due to a decline in the price of raw materials.”