Growth in business activity in the East of England fell from a record rate of expansion in September to a 16-month low last month, according to the latest Lloyds Bank Commercial Banking PMI report.

However, Lloyds says that the rate of growth remained solid overall, and was supported by further rises in new business and employment while inflationary pressures from input costs and output charges intensified.

Despite falling sharply from September’s peak of 60.5 to 56.9 in October, the seasonally adjusted Lloyds Bank East of England Business Activity Index remained above the neutral 50.0 threshold although the latest reading is the lowest sinice June 2013.

Where activity growth was reported, firms commented on stronger order books and the introduction of new products, with the sharper rise coming among service providers rather than manufacturers.

New business also rose at a reduced pace in October but expansion remained robust overall with respondents reporting growth being fuelled by strengthening demand from key international clients.

Payroll numbers again continued to rise strongly in October, marking a 23rd consecutive month of job creation and the rate of hiring in the East was ahead of UK-wide trend. Surveyed firms generally cited anticipated expansions in business activity as the principal factor behind employment growth. Levels of outstanding business were broadly unchanged, with backlog depletion at manufacturers offset by accumulation at service providers.

Input prices rose for the 66th consecutive month in October and the rate of cost inflation, although historically weak, picked up from the prior month, quicker than the UK average. Similarly, output charge inflation intensified to its most pronounced in 10 months during October, following an easing in September.

Steve Elsom, area director for SME banking in the East of England at Lloyds Bank Commercial Banking, said: “Firm’s in East Anglia should feel encouraged by this month’s Purchasing Managers’ Index. While expansion has slowed since last month’s record rate, it is important to remember that businesses in the area are still growing at a very solid pace, and indeed higher than the national average.

“So how can we ensure this solid business performance is sustained throughout the rest of this year and into next? When we consider the anecdotal evidence in this month’s report, it is clear there is a strong need for firms to consider more ways in which they can diversify and, as a result, grow.

“Introducing new products or services is a great way to start expanding market share, and exporting can significantly boost output and turnover. Whatever route firms choose to take, they should do so with confidence as East Anglia is home to a successful and thriving business community.”