South East: Lloyds Bank reports accelerated private sector output growth

February data signalled a continuation of the solid private-sector upturn in the South East, with output and new orders both rising at sharper rates. Companies further added to their payrolls, and backlogs of work accumulated. Meanwhile, input cost inflation accelerated from January’s low and firms continued to raise their charges at a marginal pace.

This accelerated output growth of private-sector companies in the region was highlighted by the headline Lloyds Bank South East Business Activity Index – a seasonally-adjusted index that tracks changes in the combined output of the region’s manufacturing and service sectors – rising from January’s 19-month low of 55.8 to 57.3.

While sharp overall, the latest expansion was weaker than the average for the current 26-month sequence of growth. Sector data suggested that output rose across both the manufacturing and service sectors.

Latest survey data also signalled a further solid rise in order intakes. The rate of growth in new work was the strongest in three months and linked by panellists to a positive economic environment and increased demand from both domestic and foreign markets.

Private-sector firms in the South East reported further solid employment growth in February, with the rate of job creation accelerating since January to the strongest in seven months. Panellists attributed higher workforce numbers to anticipated new order growth and increased business requirements.

Backlogs of work accumulated further in February. Surveyed companies generally attributed this to increased order intakes.

Input costs faced by private-sector firms in the South East rose further in February and the rate of inflation accelerated from January’s 30-month low to the sharpest since last July. With costs rising further, companies raised their selling prices. However, the rate of charge inflation was marginal.

Commenting on the Lloyds Bank Commercial Banking South East PMI survey, Mark Handscomb, area director for SME Banking in South Central England, Lloyds Bank Commercial banking, said: “February’s results paint a bright picture of the health of the economy in the South East, after activity growth slowed to a 19-month low in January. Growth picked up in February as companies operated at fuller capacity, suggesting that output will continue to expand in the coming months. Firms also continued recruiting new staff at one of the strongest rates in the survey’s history.”