South East: Lloyds Bank research finds fastest increase in output in survey's history

The latest PMI data from Lloyds Bank Commercial Banking showed a sharp expansion in the South East private sector economy, with output and new orders increasing at the fastest rates recorded in the survey’s 16-and-a-half-year history. Employment increased only slightly in August, failing to match the growth of business activity and new orders. Meanwhile, the rate of cost inflation eased for the second consecutive month. 

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, rose from 59.5 in July to 62.7 in August. This signalled the fastest growth in output recorded since the survey began in January 1997.

New orders also rose at the sharpest pace in the series’ history, and August marked the eighth consecutive month of growth. Respondents attributed the expansion in new business to a rise in market confidence and an improvement in demand.

In spite of the unprecedented surges in growth in business activity and new orders, employment in the South East’s private sector virtually stagnated in August. Anecdotal evidence indicated that while the rise in sales volumes had translated into recruitment drives in some firms, this was largely offset by difficulties in filling vacancies and cost-cutting measures.

Business outstanding grew at the fastest pace since November 1999. This was only the second increase in backlogs recorded since February 2010. The accumulation was led solely by service providers, with the manufacturing sector recording a slight decline in outstanding business.

Input costs rose for the thirteenth consecutive month in August, though the rate of inflation slowed marginally. Panellists cited increases in fuel and energy prices as the key drivers behind the cost inflation. Output prices rose for the fourth consecutive month in August and at a more substantial pace than recorded in the previous two months, in which the increases recorded were largely negligible. Increased commodity prices were cited by panellists as a reason for higher charges.

Commenting on the survey, Andy Lee, area director SME Banking West Sussex and Surrey, Lloyds Bank Commercial Banking, said: “Private sector business activity across the South East expanded at the fastest rate recorded in the survey’s sixteen-and-a-half year history in August, as new orders also grew at a record pace. The rate of activity growth was faster than that recorded for the UK overall, in spite of the fact that business activity nationally rose at the highest rate since April 1997. Survey respondents cited improved confidence and a consequent rise in domestic demand as possible reasons for this trend. Despite the record growth, employment barely changed, although this was attributed by some to difficulties in filling vacancies.”