NatWest PMI for south east reveals growth slowdown

Growth across the south east has dropped to its lowest level in two years, according to a monthly confidence survey.

The figures for August revealed a weaker improvement in business conditions across the region's private sector, with the rate of output growth the slowest in more than two years.

It comes after the publication of the NatWest South East Business Activity Index, which is seasonally adjusted to measure the combined output of the region's manufacturing and service sectors.

South East Business Activity Index. Source: NatWest/IHS Markit (4053727)
South East Business Activity Index. Source: NatWest/IHS Markit (4053727)

The PMI (purchasing managers' index) stood at 51.3 in August - down from 53.3 the month before.

Any reading above 50.0 signifies growth from the previous month. The higher above the neutral 50.0 threshold, the faster the rate of expansion signalled.

London saw growth of 54.8 while the top performing regions were Yorkshire & Humber and the East of England which both recorded a reading of 56.1.

"Many firms commented on softer client demand, leading to the slowest expansion in new order books in 25 months."

In terms of inflation in the south east, input prices increased at a sharper pace in August, reflecting higher wage bills and raw material costs. However, the rate of inflation was slightly below the national average.

By sector, growth among manufacturing companies was stronger than recorded at service providers.

The report said: "The latest data signalled the softest growth of new orders since growth resumed in August 2016. The rate of growth was only modest overall and below the national average for the second month running.

"Reflecting easing growth of new orders, the level of work outstanding decreased for the first time since April during the latest survey period. The rate of deterioration was slight overall, although slower than the historical average.

"Payroll numbers were unchanged in the south east's private sector during August. Some firms commented on a lack of suitable candidates and cost cutting, although these were negated by those reporting graduate recruitment.

"Input price pressures faced by businesses in the south east sharpened during August. Firms commonly linked the increase higher fuel costs, wage bills and raw material prices. The level of inflation remained below the UK average, however."

Despite sharper input cost inflation, selling price inflation eased to a three-month low. Whilst some respondents reported price discounting to stimulate client demand, these reports were outweighed by those raising charges in response to greater cost burdens.

And although levels of optimism were more mooted, respondents remained confident overall, with many citing planned business development and new project wins.

Stuart Johnstone of the NatWest London & South East Regional Board, said: “Growth across the south east’s private sector slipped in August, with the latest data signalling the slowest expansion in over two years.

"Many firms commented on softer client demand, leading to the slowest expansion in new order books in 25 months.

"Meanwhile, input price inflation sharpened in August on the back of higher wage and raw material bills, thereby applying further pressure on local business budgets.”

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