South East: Private sector’s sharp expansion continues, says Lloyds Bank

The latest PMI data from Lloyds Bank Commercial Banking showed that the strong expansion in the South East private sector economy seen in recent months continued into September. 

While failing to match the survey-record highs set in August, the growth in output and new orders nevertheless remained strong.

In addition, employment regained growth momentum in September and rose at a solid pace following a brief period of stagnation in August.

Meanwhile, the rate of cost inflation accelerated, though remained marginally slower than the UK average.

Output and demand

The headline Lloyds Bank Commercial Banking South East Business Activity Index – a seasonally-adjusted index that measures the combined output of the region’s manufacturing and service sectors – fell from 62.7 in August to 60.7 in September. Despite easing, output growth in the South East remained slightly higher than the UK average.

New order growth also eased slightly from August’s survey record, but September nonetheless marked the ninth consecutive month of expansion.

Employment and backlogs

Employment in the South East’s private sector rose solidly in September, following a virtual stagnation in August. Anecdotal evidence indicated that increased levels of production were a key driver.

Meanwhile, growth in business outstanding eased similarly to the trends in output and new orders, from August’s near 14-year high. Despite this, the South East private sector’s accumulation of backlogs was the third in successive months in September, and fractionally faster than that recorded nationwide.

Input and output prices

Input costs rose for the fourteenth consecutive month in September, though at a slightly slower pace than seen nationwide. Panellists cited increases in chemicals and energy prices as the key drivers of the cost inflation.

Prices charged by firms in the South East rose for the fifth consecutive month in September. That said, the pace of inflation eased marginally since August and was slightly lower than that recorded for the UK as a whole. Increased domestic demand was cited by panellists as a reason for higher charges.

Commenting on the Lloyds Bank Commercial Banking South East PMI survey, Andy Lee, area director SME Banking for Lloyds Bank Commercial Banking, said: “September saw business conditions in the private sector across the South East continue to improve at a rapid rate. The recovery of employment growth after a near stagnation in August seems to have been driven by an accumulation of backlogs of work. The brightening regional employment picture also shows an improvement in the private sector’s confidence about the longevity of the recent output expansion, offering further encouragement for the months ahead.”