New business growth slows to weakest since February 2013

Latest survey data pointed to a slowdown in private sector activity growth in the Yorkshire & Humber region. Activity increased at the second-slowest rate since March 2013, while new order growth dropped to a 30-month low. In both cases, the rates of expansion were weaker than the UK average. Both input and output prices declined, although at slight rates.

The seasonally adjusted Lloyds Bank Yorkshire & Humber Business Activity Index posted at 53.8 in August, down from 56.1 in July, thereby signalling a weaker expansion in activity at Yorkshire & Humber private sector firms.

Moreover, the latest reading was close to May’s 26-month low and posted below the UK average. 

Underpinning the weaker increase in activity was an easing in new business growth. The rate of expansion was the slowest in two-and-a-half years and weaker than the UK average for the second straight month.

Panellists mentioned the strong pound and challenging economic conditions as factors that weighed on demand growth.

Despite weaker expansions in both output and new business, employment growth picked up in August, and was broadly in line with the UK average. However, the rate of job creation was weaker than the average over the current 27-month sequence of growth.

Resulting from dampened new order growth, volumes of unfinished work were depleted for the first time in three months in August. This contrasted with the UK as a whole, where backlogs accumulated at a slight rate.

Input prices declined in August, marking the end of a three-month period of inflation. According to panellists, the strong pound continued to drive down imported raw material costs, leading to lower purchasing prices. The rate of decline was only modest, however.

Selling prices also decreased during the month, reversing the increase observed in July. Although only modest, the rate of decline was the joint-fastest since August 2012, with firms mentioning reduced commodity prices and increased competition driving down charges.

Leigh Taylor, area director for SME Banking in the North East said: “Activity growth in Yorkshire & Humber softened for the second month running. Driving this slowdown was a weaker expansion in new business, fuelled in part by a strong pound and challenging economic conditions.

“Meanwhile, employment growth picked up and was broadly in line with the UK average. On the price front, both input and output prices decreased lower commodity costs contributed to lower purchasing prices.”

Leigh Taylor, area director for SME Banking

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