Economic recovery continues in the East

EMPLOYMENT in the East of England rose fractionally in September, as demand increased for the 17th month in a row, figures show.

The September East of England PMI report suggests that the economic recovery in the region is continuing with increases in both new orders and activity - although rising raw material costs led to continued inflation as input prices and output charges rose.

Rising to 53.4 in September, from 53.2 in the previous month, the headline seasonally adjusted Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – indicated that business activity increased at a solid pace that was broadly in line with the UK economy average.

The latest rise largely reflected growth in new orders and extended the current sequence of expansion to 17 months. Output growth was driven by the manufacturing sector, as services activity decreased.

Growth in business activity was broadly similar across the nine English regions in September. Data indicated that the stronger overall rise was driven by a return to growth in London.

The survey is compiled from information collected from a representative panel of companies based in the region and collected using identical methods across regions and countries. Economists at Markit Economics collect and process the data after questionnaires are completed in the latter half of each month.

Although new business growth in the East eased to a 12-month low in September, the latest rise was still solid, and sharper than that seen across the UK as a whole.

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According to respondents, higher new orders mainly reflected strengthening client demand.

After rising in August, outstanding business decreased slightly in September.

Work backlogs reduced across both broad sectors, with the rate of decline faster at services companies.

For the sixth time in the past seven months, employment at East of England companies rose in September but the rate of job creation was only fractional. Manufacturers recorded higher staffing levels, while service providers posted a reduction.

September data pointed to a further sharp rise in input prices at East of England firms, although at a slower pace than the UK economy average. Input costs have now increased in each of the past 17 months. According to respondents, higher raw material costs were the primary factor driving input price inflation.

Companies passed on higher raw material costs to panellists, leading to a marked increase in output prices in September.

The rate of inflation in the region was much faster than that seen across the UK as a whole, with increases in both input costs and output prices steeper in the manufacturing sector than in services.

Glenn Athey, director of Insight East, said: “September’s PMI shows that demand and output continue to strengthen amongst the region’s firms, although the pace of growth has softened this month. As found during the previous 12 months, cost price inflation continues to be a significant challenge for firms in the region.”