BUSINESS activity in the region returned to growth for the first time in three months during August, according to the latest Lloyds TSB East of England PMI report.

However, new business continued to fall, although at reduced rate, and the month saw the slowest rise in employment in nine months.

The headline seasonally adjusted Lloyds TSB East of England Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors, with any figure above 50 representing growth – rose to 51.6 in August from 45.4 in July.

However, the rate of growth was weaker than the UK economy average and was achieved despite a further reduction in new orders, the fourth in as many months.

However, the rate of contraction in August was much slower than seen in July, with manufacturing firms recording a faster reduction in new business than services companies.

Growth in output was partly boosted by steep backlog clearance in August. Outstanding business decreased for the 14th consecutive month, with the fall in the East of England much faster than that recorded across the UK economy as a whole.

East of England companies continued to raise their staffing levels in August, extending the current period of net job creation to nine months, but the pace of increase was only marginal and the weakest in the current sequence.

The rate of input cost inflation quickened in August, and was broadly in line with the UK economy average. Manufacturers recorded a faster increase in input prices than services companies.

Output prices were raised for the first time in three months during August, albeit only slightly. Panellists reported passing on higher input costs to their clients. The rate of inflation at East of England companies was marginally quicker than seen at the UK level.

Steve Elsom, area director for Lloyds TSB Commercial in East Anglia, said: “The rise in business activity during August was a welcome development given that the region’s economy had seen a sharp downturn during the previous month.

“However, new order numbers continued to fall and the East of England again underperformed relative to the UK as a whole, suggesting that a return to declining output may occur in coming months unless an upturn in demand materialises.

“Encouragingly, the region saw its first rise in business activity for three months, offering hope for the latter half of 2012.”