South East: Region records slowest output growth since June 2013, say Lloyds Bank

The South East private sector registered an ongoing solid, albeit weaker, rate of expansion at the start of 2015, according to PMI data. The rate of growth of output slowed to a 19-month low, but remained strong overall and new business growth strengthened slightly. Moreover, backlogs of work continued to rise and the rate of job creation accelerated to a six-month high.

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 – remained above the no-change mark of 50.0 for the 25th successive month in January, signalling an ongoing expansion in private sector output in the South East. The latest figure of 55.8 indicated a strong overall rate of growth, and remained above the long-run survey average of 55.1 despite falling to a 19-month low.

The service sector remained the key driver of growth in the South East in January, with activity rising at a faster rate than manufacturing production. That said, the rate of growth in services output slowed during the month.

New business intakes continued to support private sector growth in January. Moreover, the rate of expansion picked up from December’s three-month low, and was slightly stronger than the UK average.

Job creation in the South East was maintained in January, and the rate of workforce growth strengthened to a six-month high. Employment growth was strong at both manufacturers and service providers. Despite expansion in workforces, the volume of outstanding business increased for the 19th consecutive month.

Inflationary pressures in the South East private sector economy eased further in January. Average input prices rose at the slowest rate in the current two-and-a-half year sequence of inflation, while prices charged for goods and services were broadly unchanged since December. A number of firms reported passing on lower fuel prices to customers.

Commenting on the Lloyds Bank Commercial Banking South East PMI survey, Mark Handscomb, area director for SME banking in the South East, Lloyds Bank Commercial Banking, said: “The South East registered the slowest rate of output growth for over a year-and-a-half in January. But this moderation should be viewed in the context of surging rates of expansion over this period, as other survey indicators paint a bright picture for the coming months.

“New business growth strengthened slightly and the rate of job creation hit a six-month high. The weak price pressures currently prevailing in the South East and across the UK as a whole should boost consumer demand.”