South East: Rising demand offset by increased input costs

Job creation in the South East reached a nine-month low in October, despite demand increasing across the region, according to the latest Lloyds Bank Regional Purchasing Managers Index (PMI).

The South East PMI registered 54.2 in October, slightly below 54.4 in September. A reading greater than 50 signifies expansion in business activity, whereas a reading below signals contraction.

The Lloyds Bank PMI, or purchasing managers’ index, is the leading economic health-check of UK regions. It is based on responses from manufacturers and service providers about the volume of goods and services produced during October compared with a month earlier.

Job creation eased to a nine-month low in October, however higher demand fuelled business activity growth, with new orders rising at the fastest rate for three months.

Despite this, growth of new business orders remained at a slower pace than the UK average in October.

Firms in the region continued to face sharply rising input prices, however the rate of inflation eased slightly from the previous month. In response, businesses passed on part of these cost burdens to customers in the form of higher prices charged for goods and services.

Phil Kirk, regional director for the South East at Lloyds Bank Commercial Banking, said: “Businesses in the South East saw a strong start to the last quarter of 2017, with an uplift in new orders sustaining growth. Rising demand is ensuring firms have a healthy pipeline for the next few months, and the new year ahead.

“There are still a few signs that some firms are being squeezed, with fewer jobs coming onto the market and rising input costs. Businesses will need to prepare for these additional costs in the long-term.”