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The latest from the Black Country 

Region’s Growth Rate Expands at Fastest Rate for 20 Months

According to the latest Lloyds Bank regional PMI for November released today:

  • WM PMI strengthens to 58.9 in November from 58.2 previously
  • EM PMI rebounds to 56.7 in November from 53.5 previously
  • November WM PMI records strongest regional growth rate in UK
  • Acceleration in WM business activity fastest in 3-months to November
  • Price pressures continue to tighten but regional-national differential narrowing
  • Employment growth reaches a 10-month peak
  • Growth momentum in both EM & WM expected to be sustained into H1 2017

The WM outperformed all other UK regions according to the latest regional Lloyds Bank WM PMI produced by IHS Markit, with private sector enterprises recording output growth at its strongest for 20-months.  Buoyed by new business orders, and although work backlogs are rising, this has contributed to increased recruitment.  The pattern of growth was balanced across manufacturing and services sectors, and attributed to stronger confidence levels amongst customers and clients.

The robust rate of expansion was leading to many respondents reporting some capacity constraints.  As a result, if demand continues at this pace into the New Year, access to capital financing for investment, as well as additional labour resources in an already tightening market, will be critical to sustaining momentum.

Similar build-up of pressures in the labour market were reflected in last week’s IHS/REC Midlands Jobs Report, which saw close to half of all firms reporting an increase in permanent appointments.

This continued resilience of economy, notwithstanding widespread earlier pessimistic commentary on the likely impact of Brexit, was presaged by the recent national PMI data – the revival of manufacturing continued for a fourth consecutive month to November; the construction sector recorded a rebound in the same month after faltering performance in the third quarter; whilst services performance accelerated.

ONS data was more mixed, with manufacturing easing according to official data.  However the second estimate of third quarter activity registered that GDP was 2.3% higher in July to September 2016 compared with the same quarter a year ago, with the ONS concluding that Brexit has as yet had scant impact on growth prospects.  Furthermore, between the second and third quarter, business investment is estimated to have increased by 0.9%, from £43.8 billion to £44.2 billion, the second consecutive quarter of growth.

Consumer prices have been on an upward trajectory since the second quarter, with underlying price pressures firming notably in the second half.  Prices prior to the referendum, rose largely as a result of the recovery in commodity prices since the beginning of the year, notably oil, but have since intensified by the post referendum depreciation of £ - in nominal terms equivalent to 15%.  Whilst producer input prices surged as £ fell in the second quarter, this was not immediately reflected in producer output prices, indeed there was some easing in price pressures in August and September.  Further weakening of £ in November has however led to a pick in both producer input and output prices, and this can be expected to feed through into rising CPI in the new year.  The latest WM PMI indicates that producer prices are continuing to accelerate rapidly, although regional-national differential narrowed.

Corin Crane, Chief Executive of the Black Country Chamber of Commerce, commented: “The vibrancy and strengths of the local economy are once again demonstrated by today’s West Midlands PMI release, not only is growth robust across all sectors, but the pace is the strongest for 20 months and fastest in UK.  The rapid depreciation of £ now appears to have stabilised, and the competitiveness provided by this new trading range, US$1.25, should continue to support growth into the New Year.  The downside of this is that producer input prices have risen sharply, and it appears that these are now being fed through to consumers.  Infrastructure constraints are increasingly evident, with broadband access continuing to dampen potential prospects – Government efforts to redress this weakness are welcome.

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