Slight Rise in Business Activity Amid Fastest Growth of New Work for a Year-and-a-half

Michelle Remo, “Big 4″ observer
September 11, 2012 /

August data highlighted a renewed expansion of both business activity and incoming new work across the Welsh private sector, led by an upturn in manufacturing. This contributed to a slight rise in employment levels since July, although a continued reduction in outstanding workloads suggested an ongoing lack of pressure on
operating capacity. Input cost inflation meanwhile reached a three-month high, driven by increased fuel prices, which in turn resulted in a modest rise in output charges at private sector companies.

The headline seasonally adjusted Lloyds TSB Wales PMI Business Activity Index registered 50.3 in August, up from 47.4 in July and indicative of a marginal expansion of private sector output. Although the latest reading was lower than the equivalent for the UK as a whole (52.6), it was a marked improvement on the seven-month low posted during the previous month. Manufacturers led the upturn in August, while service providers
signalled a further reduction in business activity.

An overall expansion of output in Wales during August reflected a rebound in new business intakes, again driven by a solid expansion across the manufacturing sector. The increase in incoming new work was the most marked since February 2011 and slightly stronger than the trend for the UK as a whole.

While staffing levels increased only marginally in August, it was still the most marked pace of growth since December 2010. The return to net job creation was driven by the manufacturing sector, as employment in services dipped slightly during the latest survey period. August data indicated that backlogs of work continued to fall, with firms generally citing sufficient spare capacity to meet incoming orders at their units.

Average cost burdens increased at a moderate pace in August, which contrasted with a reduction during the previous survey period. Meanwhile, prices charged by Welsh private sector firms rose for the first time in six months. Anecdotal evidence pointed to higher fuel costs, although some manufacturers noted that lower raw material prices had helped constrain inflationary pressures.


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