On the price front, input cost inflation was the strongest in nine months in September. Anecdotal evidence suggested that cost pressures arose from wage and fuel bills.
The headline NatWest South East Business Activity Index – a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors – was at 52.9 in September, up from 51.3 in August. Business activity has improved continuously on a month-by-month basis since August 2016.
Growth was broad-based across both the service and manufacturing sectors. That said, the latest overall expansion was slower than the UK-average for the fourth month in a row.
Demand for goods and services produced in the South East's private sector increased during September. The growth extended the current phase of expansion to 26 months. Stronger inflows of new orders led to higher capacity pressures in September. Backlogs of work built-up in the latest survey, following a contraction in August. The rate of growth was only fractional overall, however.
Employment across the South East's private sector increased for the first time since June. Anecdotal evidence given in the latest survey period linked job creation to higher output requirements.
September data indicated the strongest input price inflation for nine months. The rate of inflation was sharp overall and broadly in line with the historical average. Some panel respondents in the South East of England linked higher input price pressures to higher fuel and wage bills.
Despite sharper cost pressures, selling prices rose at a slower pace in the latest survey period. That said, the rate of output charge inflation remained above the long-average in September. The increase in selling prices was solid overall.
Business confidence towards future growth prospects decreased to a three-month low in September. Nonetheless, firms remained strongly optimistic towards the next 12 months. New product launches alongside marketing initiatives underpinned hopes of growth in the latest survey.
Stuart Johnstone, Managing Director, London & South East, Corporate & Commercial Banking, commented: “Whilst the latest PMI data showed a stronger increase in business activity across the South East’s private sector, spurred along by rising inflows of new orders, the region’s performance remained lacklustre in the context of the UK average. Furthermore, higher wage and fuel bills added to cost burdens for local businesses in September, indicated by input price inflation hitting a nine-month high. The increase was equally felt across both the manufacturing and service sectors.
“Nonetheless, the latest data signalled renewed impetus across the region’s private sector, highlighted by the business activity growth gap between the South East and the national average shrinking since August.”
Nick Stamenkovic, NatWest Economist, said: “Business activity recovered in September, largely reversing August’s fall, but continues to lag the UK. Notably, employment picked up for the first time in three months, on rising new orders, but business confidence waned.”
Download the full South East NatWest PMI report here [PDF 672KB]
