East of England: Increase in business activity at a five-month high, says Lloyds TSB PMI survey

Steve Elsom, Lloyds TSB

Steve Elsom, Lloyds TSB - Credit: Archant

BUSINESS activity in the East of England’s private sector increased again last month, with the rate of expansion accelerating to a five-month high, according to a new report.

New business also increased, leading to the hiring of additional staff and the rate of job creation reaching a nine-month high, the latest Lloyds TSB East of England Purchasing Managers Index Survey reveals.

The headline seasonally adjusted Lloyds TSB East of England Business Activity Index registered 52.0 in February, up from January’s 50.9 and higher than figure of 51.2 for the UK as a whole.

This represents an increase in activity in the region for the third month running and the sharpest rate of improvement since September 2012.

The overall increase in activity reflected higher order intakes, mainly driven by a solid expansion across the services sector. The securing of new clients and improved underlying demand were cited to have contributed to growth in new work.

Employment levels continued to rise in February, as private sector companies responded to increased incoming new business. The rate of job creation was the sharpest in nine months and higher than in the UK as a whole. Much of the rise in workforce numbers was centred across the services sector. Meanwhile, February data indicated a fall in business outstanding. While work-in-hand increased marginally at service providers, the expansion was offset by a decline in backlogs of work at manufacturing companies.

Companies in the East of England faced increased input prices in February. Exactly 20% of respondents reported a rise in costs, and only 4% indicated a fall. While the rate of input price inflation picked up from January, it was fractionally below the overall UK average.

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Output charges rose for the fourth month running during the latest survey period, and at the fastest pace since June 2011. Furthermore, the rate of charge inflation was higher than in the UK as a whole. Sector data suggested rising output prices for both manufacturing companies and service providers.

Steve Elsom, area director for Lloyds TSB Commercial Banking in East Anglia, said: “Business activity in the East of England continued to rise in February, underpinned by rising employment levels and an increase in new work orders.

“This was also the third successive month of improving business conditions in the region. The rise in employment was driven by a solid expansion of workforce numbers by service sector companies, while staffing levels among manufacturers were close to stagnation.”

: : A separate survey by business advisers BDO indicates that business confidence in the East of England improving, with tThe BDO Optimism Index having increased by 1.7 points last month, following a 21-year low in January.

However, despite this increase, businesses still do not anticipate growth in the next two quarters and a sharp increase in the BDO Inflation Index points to further pressure on businesses bottom lines.

BDO’s Optimism Index, which predicts business performance two quarters ahead, increased to 90.6 in February from a reading of 88.9 in January, the biggest increase in the index for five months. However, the Optimism Index remains well below the 95.0 mark which indicates growth, as it has been since May 2012.

BDO’s Inflation Index, which measures inflationary expectations one quarter ahead, increased from 100.4 in January to 101.5 in February, its highest level since September 2012. These added inflationary pressures could hamper business performance over the coming three months.

Richard Kelly, partner and head of BDO LLP in the East of England, said: “We encourage the MPC to increase its Quantitative Easing programme, but the Government needs to take further action to ensure that funding goes to where it is most needed, to British business and to the housing market.

“Not only have we got the most consolidated banking market in the G7, we also have the smallest corporate bond market. Action needs to be taken both to address these issues and to help the banks to accelerate economic recovery.”