Region buoyed as business conditions continue to improve

BUSINESS conditions in Yorkshire and the Humber continued to improve during March, although the rising cost of raw materials continues to bite the private sector, according to a new report.

The latest Lloyds TSB Yorkshire and the Humber Purchasing Managers’ Index (PMI) report said both input and new business increased at strong paces during the month, with new orders growing the fastest since April 2004.

The headline business activity Index, which measures the combined output of the region’s manufacturing and service sectors, registered 57.9 in March, down from 58.2 in February, indicating a strong increase in activity levels.

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Although output growth eased to its weakest in 2011 so far, the latest reading was stronger than the UK average, and the latest rise in activity was attributed to receiving a larger volume of new business during the survey period.

Continuing the trend that started in July 2009, Yorkshire and Humber firms reported an increase in new business in March. The rise was the strongest in almost seven years and the fastest across all monitored UK regions.

Both manufacturers and service providers indicated that the rate of new order growth had quickened since February. Firms continued to expand their workforces during March, although the pace of job creation was the slowest in three months.

Outstanding work at companies in Yorkshire and the Humber fell for the second consecutive month in March. Backlogs of work were depleted at a marginal rate, in contrast to the slight accumulation registered across the UK as a whole.

Respondents in both the manufacturing and service sectors registered greater cost burdens during the latest survey period, particularly highlighting raw materials and fuel as increasing in cost.

Surveyed firms reported that a proportion of their rising cost burdens were passed on to their clients in March. However, the rate of output price inflation slowed to a four-month low and remained weaker than that of input costs.

Phil Hawker, area director for Lloyds TSB Commercial in Yorkshire, said: “The Yorkshire & Humber private sector continued to grow strongly in March.

“The average rate of output growth recorded in the first three months of 2011 was the fastest for any quarter since the fourth quarter of 1999.

“Firms attributed the latest expansion in activity to greater new business volumes, which rose at the strongest pace in almost seven years.

“Subsequently, the number of people employed in the Yorkshire & Humber private sector grew for the tenth consecutive month.

“However, the high rate of input price inflation creates a cause for concern over the sustainability of these positive trends, as greater cost burdens may weaken profitability and restrict future activity growth.”