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South East PMI Activity grew further in January, as new business rose sharply

9 February 2010

Key points:

  • Activity increased for seventh month running.
  • New business continued to rise markedly.
  • Employment only fractionally lower than one month ago.

Summary: 

The South East PMI® signalled an ongoing recovery in the region at the start of 2010 as private sector output rose further. Having rebounded sharply in Q4, the rate of expansion moderated to a level close to the long-run series trend. The seasonally adjusted Business Activity Index posted 55.3, down from 57.8 in December. New business continued to rise at a marked rate that was greater than the survey’s historic average. The labour market also showed signs of stabilising, with the rate of job shedding slowing to only a marginal pace.

The current sequence of rising output in the South East was extended to seven months in January. The rate of expansion slowed since December, but was broadly in line with the UK average.

Manufacturing remained the cornerstone of the revival in overall activity growth, as services expansion was again subdued. However, new business at service providers rose sharply in January. Manufacturing new orders also rose markedly during the month, resulting in total new business rising for the seventh month running and at a rate greater than the long-run series average.

The level of private sector employment in the South East fell in January, extending the current period of decline to nineteen months. Firms usually attributed lower workforce numbers to phased redundancies or the non-replacement of leavers. However, the rate of job shedding slowed further during the month, to a marginal pace that was the weakest in the current sequence. Continued streamlining of workforces reflected a lack of capacity pressures in the sector, as the volume of outstanding business rose only fractionally.

Renewed inflationary pressures were evident in January. Input prices rose for the fourth month running, with the rate of inflation the sharpest since October 2008 and greater than the long-run series average. Firms reported higher fuel and energy costs during the month, while manufacturers noted rising prices for packaging and plastics in particular.

The strength of cost pressures was sufficient to lead to a further rise in output prices in January. However, the rate of charge inflation was weak as intense competitive pressures remained.

Comment: 

Commenting on the South East PMI survey, Paul Lovejoy, Executive Director at SEEDA, said:

"The UK emerged from recession in the final quarter of 2009, and it seems that recovery is also underway in the South East. The marked increase in new business orders in January and the fact that employment has fallen only marginally are encouraging signs that the South East is on a sustained path to recovery. However, the service sector is not currently showing the strength needed to sustain the upturn.

"Continued increases in input prices could place a burden especially on the manufacturing sector, which so far has been the main driver behind the revival in business activity."

 

For further information, please contact:

SEEDA                                                            

Ivan Perkovic, Head of Economic Research, SEEDA
Tel: 01483 501307
Email: ivanperkovic@seeda.co.uk

Press Office, SEEDA
Tel: 01483 470155
Email: benjun-tai@seeda.co.uk

Markit

Trevor Balchin, Senior Economist                       
Telephone +44-1491-461-065                             
Email trevor.balchin@markit.com

Caroline Lumley, Corporate Communications
Telephone +44-20-7260-2047
Email caroline.lumley@markit.com

For more information please contact our press office

Tel: 01483 470155