Companies in the East of England have reported increased business activity and new orders during May.

The rate growth for new business accelerated to its fastest level in 25 months and employment levels also rose while the rate of input cost inflation eased to a 10-month low, the latest Lloyds TSB Markit Purchasing Managers Index (PMI) report reveals.

The headline Lloyds TSB East of England Business Activity Index – a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors –rose to 52.2 in May, up from April’s 51.5.

The latest reading extended the current sequence of activity growth to six months, and the rate of expansion was the sharpest since September 2012. Companies linked the rise to improved economic conditions and stronger demand.

Order book volumes also rose at an accelerated pace in May, and for a sixth successive survey period. The rate of expansion was the sharpest since April 2011, but remained below the overall UK average. Sector data suggested that a decline in new work at manufacturing firms was offset by a solid rise at services providers..

A further rise in employment levels was reported by East of England companies in May. The rate of job creation was the highest in three months, and above the overall UK average. Panellists commonly attributed the hiring of new workers to higher workloads.

An increase in incoming new business was also reflected in rising levels of outstanding business. Backlogs of work accumulated for the first time in four survey periods, albeit only modestly.

May’s data signalled increased input costs at East of England companies. While input prices have now increased for 49 months in a row, the rate of inflation eased to the weakest since last July. Companies linked the slower cost increase to a decline in some raw material prices.

In response to higher input costs, companies raised their output charges, albeit only slightly. While the overall rise was centred around the manufacturing sector, the majority of respondents reported unchanged output prices.

Steve Elsom, area director for Lloyds TSB Commercial Banking in East Anglia, said: “Business activity and new work orders continued their recent upward trend during May.

“This continued improvement in demand should support growing business confidence in the coming months, leading to further growth and job creation.

“The increased employment levels and backlogs of work also underline the region’s improving economic conditions, with firms taking on staff in response to greater demand.”