Rise in business activity slows in March.

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BUSINESS activity across Yorkshire’s manufacturing and service sectors continued to expand last month, but at its slowest pace for three months

Stronger demand and better economic conditions led to higher output, according to the Lloyds Bank Yorkshire & Humber Business Activity Index. The number of new orders continued to grow, creating new jobs, and both input and output prices also rose.

But the index, which measures the combined output of the region’s manufacturing and service sectors, registered at 55.8, down from the four-month high observed in February of 58.1.

Volumes of new orders expanded sharply again, which firms attributed to higher demand and growth from existing customers. Although rising new business has now been recorded in 20 consecutive months, the latest expansion was the slowest since June 2013.

Payroll numbers rose in March for the tenth month running. Continued growth in output and new orders again supported rising employment. Firms also commented that hiring new workers had been underpinned by the expectation of growth in the Yorkshire & Humber economy. March also saw growth in employment remaining above the UK average.

Despite the increase in new orders and business activity, levels of unfinished work declined for the second month running, and at the fastest pace since December 2012. The solid drop in backlogs suggested that firms were able to cope with the raised demand.

Input prices rose faster than February, which had seen input price inflation weaken to a seven-month low. The service sector was the main driver of cost inflation as manufacturers observed a fall in input prices.

The passing on of higher cost burdens to clients in turn led to a moderate rise in selling prices in March.

Martyn Kendrick, area director SME Banking in Yorkshire, Lloyds Bank Commercial Banking, said: “Business activity remained in expansion in March, with private sector companies in Yorkshire & Humber also recording growth in output and new orders.

“However, output grew more weakly than the previous month and the improvement in volumes of new orders was the weakest since June 2013.

He added: “Despite this, payroll numbers remained steady, highlighting resilient confidence in the outlook for the region’s economy.”