Private sector activity in the Yorkshire & Humber region increased at a solid rate at the end of the second quarter of 2016, despite the uncertainty ahead of the EU referendum (over 90 per cent of survey responses were received before 24 June).
This was underpinned by the sharpest expansion in new orders since October 2015. However, employment fell for the fourth consecutive month, albeit only marginally. Meanwhile, cost burdens rose to the greatest extent in nearly two-and-a-half years, leading to a further increase in prices charged.
The headline Lloyds Bank Yorkshire & Humber Business Activity Index – a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors – posted at 54.0 in June, down from 55.1 in May, thereby signalling a slower rate of expansion in business activity in the region.
However, the rate of increase was stronger than both the long-run series trend and the UK average. According to panellists, success in gaining new contracts led to the boost in output. At the sector level, both manufacturers and services firms saw growth in activity, with the latter registering the sharper expansion.
New orders increased at the quickest pace in eight months during July. Furthermore, the rate of expansion outstripped that seen across the UK as a whole. Surveyed companies commented on greater demand from both international and domestic clients.
Despite growth in both activity and new orders, private sector firms were cautious towards their hiring policies, with employment declining for the fourth month running. However, the rate of job shedding was only fractional overall.
Volumes of outstanding business decreased in June, signalling on-going spare capacity in the region. That said, the rate of contraction was only modest overall.
Evidence of a weaker pound driving up imported raw material prices led to extra pressure on cost burdens, with input prices rising at the sharpest rate since January 2014.
As part of efforts to protect profit margins, private sector firms raised their selling prices. Moreover, the rate of charge inflation was quicker than the UK average.
Commenting on the Lloyds Bank Yorkshire & Humber PMI survey, Leigh Taylor, regional director for SME Banking in the North East and Yorkshire, Lloyds Bank Commercial Banking, said: “Business activity at Yorkshire & Humber private sector firms increased at a robust rate at the end of the second quarter of 2016, despite the uncertainty surrounding the EU referendum vote.
“This was mainly driven by a marked expansion in new orders, which rose at the quickest rate since October 2015. However, firms remained cautious towards their hiring policies, with employment declining for the fourth consecutive month. Meanwhile, the weakness of the pound contributed to the fastest increase in input prices since January 2014.”