Growth in business activity fastest for 13 years

BUSINESS activity in Yorkshire rose at its fastest rate in over 13 years during the last quarter following growth in output, new orders and employment.
Lloyds TSB Yorkshire area director, Martyn Kendrick.Lloyds TSB Yorkshire area director, Martyn Kendrick.
Lloyds TSB Yorkshire area director, Martyn Kendrick.

According to the latest Lloyds TSB Yorkshire & Humber PMI data out today, September concluded an “exceptionally strong” third quarter, with the rate of expansion the strongest since the final quarter of 1999.

The headline Lloyds Bank Commercial Banking Yorkshire & Humber Business Activity Index, a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors, rose from 57.3 in August to 59.8 in September, to equal July’s near 14-year high.

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Martyn Kendrick, area director for Lloyds TSB Commercial Banking in Yorkshire, said: “Yorkshire & Humber’s private sector saw an impressive conclusion to an exceptionally strong third quarter last month.

“Though exceeded marginally by the average UK growth rate, the rate of expansion over the quarter was the strongest since the final quarter of 1999.

“New order growth followed a similar pattern, matching July’s nine-year high, while employment levels rose at the fastest pace for eight months.

“The improvement in employment growth from August’s five-month low was largely unsurprising given the recent accumulation of backlogs, and as levels of outstanding business rose again in September, staff numbers look set to continue to rise.”

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New orders growth rebounded in September, following a slight easing in August, due to increased promotional activity, and a rise in foreign demand, according to panellists. However, incoming new business rose in Yorkshire & Humber at a slightly slower pace than recorded for the UK as a whole.

Employment rose for the fourth consecutive month in September, and at the fastest rate since January. But, like new orders, the pace of growth was marginally below that registered for the UK as a whole.

Backlogs of work increased for the fourth successive month due to a combination of increased new order volumes and pressure on operating capacity, but the rate of accumulation was the weakest for three months.

Meanwhile, input prices rose for the 13th successive month but the pace of inflation eased marginally from August’s two-year high.

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Respondents cited increases in raw material prices, in particular oil and solvents, while some cited rising insurance and accountancy costs as the key drivers of September’s cost inflation.

Output prices rose in the Yorkshire & Humber private sector for the fifth successive month, and at the sharpest pace since June 2011. The rate of inflation in prices charged in the region was sharper than that recorded for the UK private sector as a whole.

The research comes out on the same day as the Ernst & Young Item Club’s autumn forecast, which upgraded its forecasts for economic growth this year and next to 1.4 per cent and 2.4 per cent respectively – up from 1.1 per cent and 2.2 per cent in its last quarterly forecast.

It predicted the Government’s Help to Buy mortgage guarantee scheme would lead to a rapid improvement in prospects for the housing market.

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The EY Item Club’s autumn forecast said the boost to housing demand would have a knock-on effect on prices, with predictions of a 3.5 per cent rise this year and 6.6 per cent in 2014. However, it said fears of a housing bubble were unfounded and premature at best.

According to the report, the UK’s short-term growth will continue to be fuelled by the consumer.

The recovery of the housing market, combined with falling unemployment, rising real incomes and improving confidence levels, will help to keep the tills ringing on the High Street.

However, it said the most significant boost to UK growth will come next year, when the revival in business investment and exports finally kicks in.

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The EY Item Club expects business investment to increase by nearly seven per cent in 2014 and 9.4 per cent in 2015, after falling by 5.6 per cent this year.

Prof Peter Spencer, of York University and chief economic advisor to the EY Item Club, said: “The boost from the consumer has pushed the UK economy into a progressively higher orbit, but this now needs to be supplemented by a thrust from the engines of export and investment.”

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