South East Business Activity Grew At Fastest Rate Since September 2007
8 March 2010Key points:
- Output and new business growth strengthened
- South East among top-performing UK regions
- Employment continued to decline
February’s South East PMI®, conducted on behalf of the South East England Development Agency (SEEDA), continued to signal a positive start to 2010 for the region’s private sector economy. Total activity increased at the fastest rate for almost two-and-a-half years, as signalled by the seasonally adjusted Business Activity Index posting 59.7.
New business increased at a marked rate that was above the UK average. Employment continued to decline, but at a relatively modest rate compared to the trend over the current twenty-month sequence. Meanwhile, input prices rose at the sharpest pace since October 2008, but output prices were up only marginally.
Private sector output in the South East rose for the eighth month running in February. The rate of expansion strengthened to a twenty-nine month high, and was greater than the long-run survey average. Moreover, the South East registered stronger growth than all other UK regions except London and the North West. Data suggested that manufacturing continued to drive growth.
New business growth regained momentum in February, with the rate of expansion broadly matching December’s twenty-seven month peak. The South East registered the fourth-fastest rate of increase among twelve UK regions covered. New order growth in manufacturing remained particularly strong.
Private sector employment in the South East declined in February, continuing the trend since July 2008. The overall contraction mainly reflected declining services jobs, as manufacturers expanded workforces on average. Anecdotal evidence suggested that reduced staffing levels reflected efforts to improve efficiency and the need to cut costs.
The volume of outstanding work declined for the first time in three months, with both manufacturing and services registering mild contractions.
Average input costs faced by private sector companies in the South East continued to rise in February. The rate of inflation was the sharpest in sixteen months, and higher than the long-run survey average. Sources of rising costs included commodities, fuel and exchange rate movements. However, the South East registered slower cost inflation compared to the trend for the UK as a whole. Meanwhile, charges rose only marginally for the third month running as pricing power remained weak.
Commenting on the South East PMI survey, Paul Lovejoy, Executive Director at SEEDA, said: “The February results are encouraging in that they show continued improvement in the performance of South East businesses, with growth in business activity higher than the long-term survey average. Manufacturing has again been the main driver of growth, with a strong increase in new orders. However, increasing input prices seem to be putting pressure on production costs, which could help to explain the continued fall in staffing levels.”
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