The Lloyds Bank East Midlands Business Activity Index – a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors – posted 55.4 in May, little-changed from 55.7 in April (the highest reading in three months), thereby signalling a robust expansion of activity in the region. Moreover, the latest figure was above the UK average for the fifth consecutive month.
Both manufacturers and services firms signalled output growth.
Supporting the overall increase in output was a faster rise in new orders. In fact, new business expanded at the sharpest rate since January. According to panellists, success in gaining new clients through better advertising and improved product quality, as well as greater international and domestic demand led to the latest increase in sales.
Resulting from strong expansions in both output and new business, private sector firms hired additional workers in May. Although moderate, the rate of job creation was stronger than across the UK as a whole.
Sharper growth of activity compared to new business and a further increase in payroll numbers meant less pressure was placed on capacity. Subsequently, firms were able to clear unfinished business for the first time in four months.
A rise in raw material prices stemming from the weak pound/euro rate and the implementation of the National Living Wage led to greater cost burdens in May.
As a consequence, businesses raised their charges for the fifth successive month.
Jon Pulford, regional director, SME Banking, East Midlands, Lloyds Bank Commercial Banking, said: “Robust activity growth was recorded in the East Midlands private sector during May, helped by the fastest increase in new orders since January. Firms hired additional workers, highlighting optimism towards the outlook for activity, however they faced the sharpest rise in cost burdens for over two years amid ongoing effects from the National Living Wage as well as greater imported raw material prices”.