South East: Growth continues but input costs are rising, warns PMI

Business activity growth in the South East gained momentum in September, despite input costs increasing at their fastest rate since February, according to the latest Lloyds Bank Regional Purchasing Managers Index.

The South East PMI registered 54.4 in September, up from 53.3 the previous month. A reading greater than 50.0 signifies growth in business activity, whereas a reading below signals contraction.

The Lloyds Bank PMI, or purchasing managers’ index, is the leading economic health-check of UK regions. It is based on responses from manufacturers and service providers about the volume of goods and services produced during September compared with a month earlier.

Firms in the region faced a sharp increase in average costs, which rose at the quickest rate since February this year. In response, businesses passed on part of these cost burdens to customers in the form of higher prices charged for goods and services.

New business growth cooled to its slowest so far this year, to show the weakest rate of increase in the UK, excepting the North East.

South East job creation also lost some momentum in September, lagging slightly behind the UK average.

Phil Kirk, regional director for the South East at Lloyds Bank Commercial Banking, said: “The latest PMI data revealed a solid improvement in business conditions in the South East. The uptick in business activity growth in September painted a positive picture for the sector. In addition, job creation remained strong, with a number of businesses reporting that they were investing in young people. That said, business confidence eased to its lowest level since the EU referendum, while falling growth in new business and sharpening price pressures cast a cloud over the outlook.

 “As we enter the final quarter of 2017, businesses in the consumer goods and hospitality sectors will need to ensure they have the working capital necessary to take advantage of higher demand from events like Black Friday, Christmas and New Year. 

 “Last month our Working Capital Index report found that businesses in the South of England have £120.6 billion tied up in excess working capital, which includes assets like stock and invoices. Cash that’s tied up in working capital can be released and invested in creating more stock or building capacity to meet higher demand over the festive season.”