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Midlands Growth Continues to Outperform the UK

 

The Midlands was among the strongest output performance according to the latest Lloyds Bank Regional PMIs, with the East Midlands (EM) and the West Midlands (WM) recording the highest and third highest regional PMI values in the UK respectively, at 59.9 and 56.5. This reflects a slight uptick for the EM, from 59.8 in April, and a softening for the WM, from 60.3 last month. Overall performance in the UK softened somewhat since April, possibly due to the uncertainty surrounding the General Election, with the composite UK PMI falling to 54.4 in May from 56.2 in April.

Corin Crane, Chief Executive of the Black Country Chamber of Commerce said: “The continuing strength of the production sector and the West Midlands economy shown in this month’s PMI figures is encouraging given the uncertainty that businesses are facing.”

The growth in the Midlands’ PMIs was largely driven by increases in new orders, which rose faster than in the UK overall in May, although at a slightly lower level than in April. In particular, manufacturing companies reported rises in new business, which was reflected in the UK Manufacturing figure of 56.7 in May, slightly down from 57.3 in April – a three year high. New export orders were particularly strong in May, with manufacturers’ efforts to seek new foreign markets yielding good results. The rise in new business also led to a sharp rise in business outstanding – notably in the EM which was one of the sharpest rises on record. The increases in backlogs will most likely impact on employment demand; in the Midlands there were sharp rises in employment levels in May.

The resulting hung parliament in last Thursday’s General Election results will create some uncertainty in the near-term, if not further into the future, as it raised the possibility of a second General Election this year, and disruption to the Brexit negotiation process. Sterling fell following the election result, although not as sharply as it did following the EU referendum last year. Some commentators have suggested that the possibility of a softer Brexit with a Conservative minority government may have reduced the fall in Sterling to a small extent.

If the Sterling does fall into a new, lower, trading range, then price pressures on businesses, which until recently had been softening, could once again become acute. Input price rises were attributed to Sterling conditions, raw material costs and staff costs in the Midlands. Output prices growth in the Midlands remained higher than in the UK overall in May, as input prices were passed on to customers, but growth has softened since the peak at the beginning of 2017. Price rises were sharper in the production sectors than the services sectors, this could partly explain the faster growth in the Midlands than the UK overall, with its strength in the production sectors. This was borne out in the producer price inflation figures for May.

Julian Beer, Deputy Vice Chancellor of Birmingham City University said: “It is good to see the region’s strong performance continuing, as shown by this month’s PMIs. The unclear outcome of the General Election results last week, as well as the Brexit negotiation process due to begin soon, will cause some uncertainty in the near term, but I believe that the resilience of the Midlands economy will soon bear through.”

For more information about the Black Country Chamber of Commerce please call 0330 024 0820.

 

The Midlands was among the strongest output performance according to the latest Lloyds Bank Regional PMIs, with the East Midlands (EM) and the West Midlands (WM) recording the highest and third highest regional PMI values in the UK respectively, at 59.9 and 56.5. This reflects a slight uptick for the EM, from 59.8 in April, and a softening for the WM, from 60.3 last month. Overall performance in the UK softened somewhat since April, possibly due to the uncertainty surrounding the General Election, with the composite UK PMI falling to 54.4 in May from 56.2 in April.

 

 

Corin Crane, Chief Executive of the Black Country Chamber of Commerce said: “The continuing strength of the production sector and the West Midlands economy shown in this month’s PMI figures is encouraging given the uncertainty that businesses are facing.”

 

The growth in the Midlands’ PMIs was largely driven by increases in new orders, which rose faster than in the UK overall in May, although at a slightly lower level than in April. In particular, manufacturing companies reported rises in new business, which was reflected in the UK Manufacturing figure of 56.7 in May, slightly down from 57.3 in April – a three year high. New export orders were particularly strong in May, with manufacturers’ efforts to seek new foreign markets yielding good results. The rise in new business also led to a sharp rise in business outstanding – notably in the EM which was one of the sharpest rises on record. The increases in backlogs will most likely impact on employment demand; in the Midlands there were sharp rises in employment levels in May.

 

 

The resulting hung parliament in last Thursday’s General Election results will create some uncertainty in the near-term, if not further into the future, as it raised the possibility of a second General Election this year, and disruption to the Brexit negotiation process. Sterling fell following the election result, although not as sharply as it did following the EU referendum last year. Some commentators have suggested that the possibility of a softer Brexit with a Conservative minority government may have reduced the fall in Sterling to a small extent.

 

 

If the Sterling does fall into a new, lower, trading range, then price pressures on businesses, which until recently had been softening, could once again become acute. Input price rises were attributed to Sterling conditions, raw material costs and staff costs in the Midlands. Output prices growth in the Midlands remained higher than in the UK overall in May, as input prices were passed on to customers, but growth has softened since the peak at the beginning of 2017. Price rises were sharper in the production sectors than the services sectors, this could partly explain the faster growth in the Midlands than the UK overall, with its strength in the production sectors. This was borne out in the producer price inflation figures for May.

 

 

Julian Beer, Deputy Vice Chancellor of Birmingham City University said: “It is good to see the region’s strong performance continuing, as shown by this month’s PMIs. The unclear outcome of the General Election results last week, as well as the Brexit negotiation process due to begin soon, will cause some uncertainty in the near term, but I believe that the resilience of the Midlands economy will soon bear through.”

 

Last modified on Friday, 16 June 2017 08:09

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