There was a further improvement in the business environment across the South East region in March, with the latest NatWest South East PMI® data continuing to signal demand and activity growth.
The headline Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – posted at 51.4 in March, down from 53.0 in February to indicate a slower rate of output growth.
The expansion marked the fourth successive rise in activity and one that was consistent with a slight rate of increase.
Survey members noted that the uplift reflected improved demand for South East goods and services.
New business placed at private sector firms across the South East rose for the second successive month in March. That said, the rate of expansion was only slight and little changed from that seen in February.
The uptick in new work reportedly reflected greater customer interest. The increase in the region remained slower than the national average.
The seasonally adjusted Outstanding Business Index registered below the 50.0 no-change mark for the tenth month running in March, to signal a further decline in the level of incomplete work.
Panellists noted that order completion led to a drop in the level of outstanding business. Although solid, the rate of depletion was the softest in nine months. Despite easing on the month, the local decline in backlogs was more pronounced than the UK average.
As has been the case since the start of the year, private sector firms across the South East region recruited additional staff in March. The rate of job creation was the quickest in seven months and modest overall.
According to anecdotal evidence, headcounts were increased in line with current demand, with some firms taking on temporary staff in particular. Only Northern Ireland registered a faster increase in workforce levels than that seen locally.
Operating expenses faced by private sector firms across the South East increased again at the end of the quarter, thereby marking nearly four years of successive monthly rises.
Panel members often attributed inflation to increased price lists at suppliers and higher fuel costs. Despite easing slightly on the month, the rate of cost inflation remained historically elevated and was broadly in line with the national average.
Prices charged by South East private sector companies remained on an upward trend in March. Where an increase was recorded, this reflected the passing through of raised input costs to the customer in order to protect profit margins.
Though sharp overall, the rate of charge inflation dipped from February and was the softest for five months. The local rise in selling prices was slightly faster than the UK average.
March survey data saw sentiment towards the outlook for output dip from February’s 30-month high.
Nevertheless, optimism remained well-above the historical average, as some firms expect economic conditions to improve and others expressed upbeat growth forecasts, including for export orders.
The West Midlands was the only monitored region or nation more confident that output would rise over the coming year than the South East.
Catherine van Weenen of the NatWest London and the South East regional board said: “Private sector firms across the South East remained on a growth footing at the end of the first quarter, as signalled by the latest NatWest PMI® data.
“A further improvement in demand encouraged firms to raise output levels for the fourth month in a row.
“Activity growth eased on the month and was only modest, however, matching that of demand.
“Though the UK average outpaced the South East in terms of growth of activity and new work, the region was the second-most optimistic that output would rise over the coming year, behind only the West Midlands.
“Though cost pressures remained sharply elevated, companies continued to take on additional staff and firms were able to make further inroads to their backlogs, though at the softest pace for nine months.”
