Welsh Private Sector Output Slips Back into Contraction During June

July 09, 2012 /

June data signalled that overall business conditions deteriorated in the Welsh private sector, as output and new orders both declined since the previous month.

Employment was close to stagnation, while unfinished work fell at a rapid pace. Input cost inflation meanwhile eased markedly in June, allowing firms to attempt to support new business intakes through price discounting.

At 49.0 in June, down from 51.0 in May, the headline seasonally adjusted Lloyds TSB Wales PMI Business
Activity Index was below the neutral 50.0 mark for the first time since February. The latest reading signalled a marginal reduction in business activity, which contrasted with a modest expansion across the UK overall. Sector data indicated that higher manufacturing production in Wales was offset by a sharper drop in service sector business activity.

Volumes of new work received by private sector companies in Wales decreased for the second month running
in June. The rate of contraction accelerated to its fastest since October 2011, largely reflecting a marked fall in the service sector.

Staffing levels at private sector companies increased fractionally in June, which contrasted with a moderate
reduction during the previous survey period. However, signs of spare capacity persisted during June, with
backlogs of work falling at a steep pace that was the fastest in four months. Lower levels of work-in-hand (but not yet completed) were registered in both the manufacturing and service sectors during the latest survey period.

Cost inflation continued to moderate in June. The latest rise in average cost burdens was only marginal and the slowest since July 2009. This was led by a drop in input prices at manufacturing companies. Anecdotal
evidence cited lower costs for fuel and a range of raw materials.

Weaker overall cost pressures, alongside subdued underlying client demand, resulted in price discounting by
Welsh private sector companies in June. Lower output charges have now been recorded in each of the past four months.


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