The latest data from the South West PMI Report has been released and has pointed to a sustained, but slowing, expansion of the region’s private sector economy.

Output growth was sustained in December with the seasonally adjusted Business Activity Index posting 55.3, down from 56.1 in November, but comparable with average growth for Q4 as a whole (55.1).

Volumes of new business rose in December for the thirty-first consecutive month. At 52.4, new orders in the region were inline with the rest of the UK (52.3) and ahead of October’s recent low (51.8).

Employment levels in the South West have now risen in each month over the past two years. However, with the index at 51.4, the rate of employment growth has been slowing since the summer and fell to the lowest level since January 2006.

A slowdown in the rate of new orders was cited as a factor behind an accelerated reduction in backlogs. The decline in backlogs was the fastest recorded since May 2005.

Input price inflation remained intense during December but eased to 65.3 from November’s high of 66.1.  Input price inflation remains higher than elsewhere in the UK.  Panellists attributed the rise in costs to the increased price of raw materials, fuel, meat and dairy products.

Output prices also continued to rise but at the lowest rate for six months, suggesting that companies were finding the environment more competitive and/or demand lower, both of which would reduce pricing power.

RBS senior economist Robbie Denoon commented: “The South West economy continued to grow in December, but the pace of growth is moderating. Business activity, new orders and employment growth all slowed, and the service sector suffered more than manufacturing.  Input price pressures remained intense, while a difficult competitive environment appears to have reduced companies pricing power resulting in lower output price inflation.”

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