The latest regional purchasing managers' index (PMI) for Yorkshire and the Humber follows another report that showed the number of profit warnings for the region's plcs have fallen by nearly a third.

The Royal Bank of Scotland PMI index for September showed that Yorkshire and the Humber's private sector economy continued to contract, with activity declining for a fifth consecutive month.

Robert Blotevogel, the RBS economist, said both new orders and employment recorded sharp falls although he added that the region's business activities remained above the UK average for the second month in a row.

The findings pointed to a prolonged period of subdued growth, he commented, adding: "Fortunately, policymakers have started to fight the slowdown aggressively."

The September index shows:

n A sharp drop in volumes of new business in Yorkshire and Humber – worse than the national average – due to weakening consumer demand, fewer client inquiries and the downturn in the construction sector

n A reduction in backlogs of work as a result of falling levels of new business

n Job shedding accelerated to the fastest level in 10 years, particularly among service providers, through redundancies and natural wastage

n Input costs remained substantial, with businesses citing
higher costs for energy and raw materials and some blaming the decline in sterling against the dollar

n Output prices have risen at a robust pace as firms sought to pass on higher costs to customers.

In the rest of the UK, London and the South East saw only slight falls of output activity, with Yorkshire and the Humber following in third place.

Northern Ireland suffered the sharpest contraction, with the East Midlands, Scotland and the east of England also faring badly.

Meantime, research published by Ernst & Young revealed how all sectors of UK plc continue to be heavily impacted by the volatile global markets, with 111 profit warnings issued in the three months to September 30.

This compares badly against the same period last year – up almost a third – and is the highest Q3 figure since 2001.

Corporates in Yorkshire and the North East bucked the national trend, however, with profit warnings falling from 13 to 9 for the same period.

Hunter Kelly, restructuring partner at Ernst & Young in Leeds, said: "UK profit warnings continued to come thick and fast during the third quarter, crossing the 100 mark once again.

"The worst is almost certainly yet to come for UK corporates – the credit crisis is far from over. If we are not already, we are likely to be in recession by Christmas."

In Yorkshire and the North East, profit warnings were recorded in six sectors including support services, general retailers and construction and materials.

Mr Kelly said half of the Yorkshire companies blamed weaker consumer confidence and the Yorkshire shopper staying at home for their woes.

He predicted a make-or-break Christmas for retailers, who are squeezed by falling consumer discretionary income and their own increasing costs.


How PMI index is compiled

The purchasing managers' index is regarded as a good indicator of the general health of the economy.

Researchers select companies and track variables such as output, new orders, employment and prices across the manufacturing and service sectors.

They ask respondents to say whether business conditions have improved, deteriorated or remained the same in contrast to the previous month.