RISE IN NEW JOBS DRIVES ECONOMY - Source SOUTHWESTBUSINESS.CO.UK 12.10.10.

GROWTH of the South West private sector economy accelerated last month with an increase in new business and jobs created, according to new research.

Economists at financial information service Markit said the growth of the private sector economy regained momentum in September - but the improvement was largely due to manufacturing.

Overall new business increased "solidly" and while staffing levels rose only "marginally", this was the fastest rate in the third quarter of the year.

Input cost inflation increased again, but the rise in charges was "relatively muted".

The data comes from Markit's Purchasing Managers' Index (PMI), a monthly survey of selected companies sponsored by the South West Regional Development Agency (SWRDA) and designed to provide an early indication of what is happening in the private sector economy by tracking variables such as output, new orders, employment and prices.

The headline seasonally-adjusted Business Activity Index, which measures the combined output of the region's manufacturing and service sectors, rose from 52.8 in August to 54.1 in September. But it is still behind July's three-month high of 54.5.

Readings above 50 signal expansion; those below 50 indicate contraction.

The report said a stronger expansion in incoming new business supported a faster rise in activity. However, the manufacturing sector remained the main contributor to the increase in activity and marginal job rise.

Meanwhile, input-cost inflation persisted during the month, but strong competition for new business led to weak pricing power.

Growth of activity has now been recorded for 17 successive months, with the latest increase faster than that indicated for the UK.

The overall rise in activity was supported by a solid expansion in new orders, the report said.

The rise in new business was sharper than that indicated in August.

However, new work intakes received by service companies continued to decline. Despite sustained growth in incoming new business, backlogs of work at South West companies fell again during September. The latest reduction in outstanding business was the weakest in four months.

Reflective of increases in new orders and output, employment rose during September, which represented an improvement on the previous month when staffing levels remained unchanged.

Firms' input costs increased during September, driven by higher raw material and staff costs.

The rate of input cost inflation accelerated for a second successive month to the strongest since May, and was above the long-run average.

Output prices also increased last month, but the rise was only marginal, as strong competition for new business prevented firms passing on the full extent of higher costs to clients.

Shane Vallance, SWRDA's economics and evidence manager, said: "These results show business activity bounced back quite strongly in September."However, we would want to see this extended for several months before concluding that August marked the low point in business confidence for 2010."