East of England: Region’s recovery losing momentum, says Lloyds TSB PMI survey

THE East of England’s economic recovery lost momentum during May with the level of activity slowing and new business decreasing slightly compared with the previous month, according to a new survey.

However, the latest Lloyds TSB East of England PMI report says that employment levels in the region continued to advance and companies raised output prices in response to continued cost inflation.

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 – remained above 50.0 in May, indicating that

activity in the region continued to rise.

However, at 52.3, down from 53.4 in April, the index signalled that the rate of growth slowed for the third month running to its weakest level since last November.

The increase in activity was broadly in line with that seen across the UK economy as a whole, with the overall growth of activity being driven by the service sector.

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New business fell fractionally in the East of England during May, ending a six-month period of rising new orders.

The decline recorded in the region contrasted with growth at the UK level. As was the case with activity, new

orders increased at service providers, but decreased at manufacturers.

A lack of new business contributed to a further reduction in backlogs of work in May, with the rate of

depletion accelerating at the sharpest since September 2009.

As has been the case throughout the past six months, employment rose in May with higher staffing levels

recorded at both manufacturers and services companies. The rate of job creation slowed over the month, but

remained faster the UK economy average.

The rate of input cost inflation eased for the second month running but remained solid and sharper than that seen across the UK as a whole. Companies cited rising energy and raw material costs, as well as higher salary payments.

Firms in the region raised their output prices in response to increased input costs, in contrast with a fall nationally.

Steve Elsom, area director for Lloyds TSB Commercial in East Anglia, said:

“While the slowdown in activity growth across the East of England during May was in line with that seen at the wider UK level, a concerning aspect of the latest survey was the first drop in new business since October 2011.

“Although the fall was only fractional, it suggests that firms are finding it difficult to stimulate demand amid a reluctance of clients to commit to new projects.”