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News: UK economic recovery weakens further

Wed, 16 May 12

April saw a reversal of the English regional growth upturn seen in the previous month, according to the latest Lloyds TSB regional Purchasing Managers' Index.

At 52.6, down from 55.3 in March, the index measuring overall private sector business activity in the English regions was the lowest since November 2011, but still above the 50.0 mark that separates expansion from contraction.

The moderation in output growth was replicated across all the regions monitored in April, with the exception of the North East where lower levels of business activity were recorded for the second month running.

The West Midlands and London continued to report the fastest rates of private sector output expansion in April, despite the former posting a much weaker manufacturing performance than during March.

The latest survey generally pointed to the slowest pace of regional output growth in 2012 so far, with the South West and North West moving close to stagnation in the April survey period.

The manufacturing sector helped to drive growth in the South West and employment in Yorkshire & Humber. In Wales, a manufacturing-led upturn in business activity meant that the private sector overall outperformed the wider UK economy for the first time in eight months, recording the first increase in new work since March 2011.

In line with the trend for business activity, April's data generally showed weaker rates of new order growth across the English regions. The North East was the only region to register an outright contraction.

Reports from survey respondents mostly cited weaker demand from export markets, alongside subdued spending trends among both businesses and consumers. Slower new business growth in turn allowed firms to reduce their backlogs of work in April, with marginal rises in London, Yorkshire & Humber and the West Midlands the only exceptions.

Seven of the nine English regions saw a rise in private sector staffing levels in April, with the exception being employment stagnation in the South East and North East. However, cautious hiring policies meant that the pace of job creation generally remained only marginal, especially among manufacturing companies.

Survey respondents reported another solid rise in their average cost burdens in April, but the rate of inflation eased in every region except London. Anecdotal evidence frequently cited increased energy, fuel and other oil-related input prices during the latest survey period. Meanwhile, output charges continued to rise among private sector firms, particularly those in the manufacturing sector. However, subdued inflation of average tariffs at service companies meant that overall prices charged only increased marginally in April.

John Maltby, group director, Lloyds TSB Commercial, said: "April's survey shows that overall growth was maintained at the start of the second quarter of 2012 for private sector firms across the English regions, but at a weaker rate than had been the case earlier in the year.

"This loss of momentum is magnified when set against the news that the wider UK economy dipped back into recession in the first quarter of the year. Despite this short-term set back, there are some positive figures for firms to take into the summer months, not least the continued upturn in new business receipts and the general resilience of private sector labour market conditions.

"The latest data also showed signs of a moderation in cost pressures throughout the English regions, which will give businesses extra breathing space in their efforts to improve efficiency, while also supporting investment and job creation in the long term."



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