Report reveals sharp slump in Plymouth private sector
THE South West's private sector economy saw its sharpest fall in business activity for three-and-a-half years in October, a new report says.
The Lloyds TSB South West PMI showed the second consecutive monthly fall in output, with a reduction in jobs, albeit marginal, and cost inflation having accelerated to its highest level since April.
The headline Lloyds TSB South West Business Activity Index – a seasonally adjusted index that tracks changes in the combined output of the region's manufacturing and service sectors – dropped to 47.7 in October, from 49.6 in September.
Readings above 50 signal expansion, those below 50 indicate contraction.
October's figure was the lowest reading since April 2009 and pointed to a faster pace of contraction than the UK as a whole.
Sector data highlighted that the overall reduction in South West business activity was concentrated in the manufacturing sector.
Meanwhile, new business intakes increased only marginally in October, and at a slower rate than that recorded during the previous month, the report, compiled by economists at Markit, showed.
As with the trend for output, lower levels of incoming new work mostly reflected a reduction in the service economy.
Staffing levels decreased for the third consecutive month, but the rate of contraction was only marginal and slower than that recorded in September.
Companies that reduced their workforce numbers generally cited lower workloads in recent months and corresponding spare capacity at their units, the report said.
A lack of pressure on operating capacity was highlighted by the marked drop in business outstanding across the South West private sector.
Lower volumes of work-in-hand, but not yet completed, have now been recorded for 19 consecutive months.
October's data also indicated a robust increase in average input prices at companies operating in the South West private sector.
This was widely attributed to rising fuel and energy costs.
Service sector firms recorded a particularly sharp rate of cost inflation during the latest survey period.
However, prices charged by South West companies increased only marginally in October, as subdued underlying client demand continued to squeeze pricing power in the private sector economy.
David Beaumont, area director for Lloyds TSB Commercial in Devon and Cornwall, said: "Companies across the South West saw a second month of falling output levels in October, as worries about the economic outlook continued to weigh on business and consumer spending.
"The service sector was at the forefront of the overall fall in business activity, which offset a degree of resilience in manufacturing production during the latest survey period.
"Rising energy and fuel prices resulted in increased cost pressures in October, which mirrored the wider UK trend and highlighted a greater squeeze on operating margins among firms in the region."