Marked slowdown in growth for firms in East during February, Lloyds Bank PMI report shows

Steve Elsom of Lloyds Bank.

Steve Elsom of Lloyds Bank. - Credit: Archant

Growth for businesses in the East of England slowed markedly during February, according to the latest Lloyds Bank Purchasing Manager’s Index (PMI) report.

Rates of expansion in both output and new orders fell to 33-month lows, although companies continued to take on additional workers with job creation in the region outpacing the national average.

There was also evidence of inflationary pressures building up, as cost inflation accelerated and tariffs were raised for the first time since September 2015.

The seasonally-adjusted Lloyds Bank East of England Business Activity Index also fell to a 33-month low, from from 56.6 in January to 53.5, with anecdotal evidence indicating that the deceleration in growth reflected a softer expansion in incoming new work.

New orders rose at their slowest pace since May 2013, although growth remained stronger than the UK-wide trend. Both manufacturers and service providers across the region saw growth, but with the latter postiing the sharper rate of expansion in new business.

Underpinned by another increase in new order intakes, staffing levels rose in February. Despite softening compared with the previous month, the rate of job creation continued to outstrip the UK average. Employment growth in the service sector was again faster than in manufacturing.

The level of unfinished business held by private sector firms in the East of England fell for the sixth month running in February, albeit at a slower pace that was broadly in line with the long-run series average.

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February data indicated that falling purchase prices at manufacturers were, once again, more than offset by rising cost burdens at service providers. Subsequently, input costs in the private sector as a whole increased for the fourth consecutive month, with cost inflation accelerating slightly since January.

As a consequence, businesses raised their selling prices for the first time since last September. Although only marginal, the rate of charge inflation was slightly stronger than the UK-wide trend.

Steve Elsom, regional director for SME Banking in East England at Lloyds Bank Commercial Banking, said: “February’s PMI data suggest that there has been a considerable weakening of growth momentum in the East of England.

“However, the sharp slowdown in output growth mirrors most other regional trends. The risk of deflation in the region is fading, as highlighted by a stronger increase in costs and the first rise in tariffs for five months.”