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SE PMI Report - Output growth strengthened in October, but remained relatively weak

12 November 2010


Commenting on the South East PMI survey, Ivan Perkovic, Head of Research & Economics at SEEDA, said:

“The most recent survey results confirm a modest output growth in October for the third consecutive month, after August’s low. Service providers fared relatively better than manufacturing firms, although the latter reported improved export demand for their products. It is encouraging to see that the South East posted the fourth-fastest rate of job creation of the twelve regions covered, although service employment declined marginally in October. Inflationary pressures were the main concern for businesses in October as input price inflation accelerated to its fastest rate in two years.”

Summary of the report:

October PMI™ data indicated that the recovery in private sector output in the South East was maintained for the sixteenth successive month. Activity growth picked up further from August’s low, with the seasonally adjusted Business Activity Index rising to 53.4, from 52.6 in September. That said, it was still weaker than the long-run survey average. It also remained slightly below the UK average. Manufacturing production rose at a much slower pace than the marked rates seen earlier in 2010, while services activity growth was only slightly weaker than the trend seen so far this year.

Incoming new business increased for the sixteenth successive month in October. Some firms reported improved export demand for their products. The rate of growth was the fastest in three months, but remained below the average for the currentsequence of expansion. Growth rates for both manufacturers and service providers remained below their respective long-run averages.

Growth of employment was sustained for the second month running in October, in line with the pattern for the UK as a whole. Moreover, the South East posted the fourth-fastest rate of job creation of the twelve regions covered. That said, the overall rise in workforces masked a marginal decline in services employment, as manufacturers took on more staff at a robust pace.

Survey data continued to signal a lack of pressure on capacity in October, as outstanding business fell for the ninth month running. Moreover, the rate of depletion remained sharp. Some firms commented that completed projects were not being replaced with new work.

Input price inflation remained sharp in October. The rate of inflation accelerated for the third month running to its fastest since September 2008. Metals, plastics, chemicals, paper, packaging and fuel were all reported to have risen in price during the month. Firms raised their output prices in response, and the rate of inflation was also the steepest since September 2008. Inflationary pressures were much stronger in manufacturing than services.

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