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The latest Lloyds TSB survey indicated an acceleration in growth of London’s private sector economy in March. Business activity rose at the second-sharpest rate of all UK regions, underpinned by a robust increase in new orders. Backlogs of work rose as a result, although this did not prevent companies cutting employment further. Solid increases in both input and output prices were recorded.

Output and demand

Private sector firms in the capital reported a marked rise in business activity during March. Growth of output picked up to the sharpest since July 2011. Service providers were the principal drivers of the expansion. The current period of growth now stretches to four months.

Underpinning higher activity was a further increase in the level of new business received by London private sector companies. The latest rise in new work was the strongest for eight months and much sharper than the UK average. There were reports that improved client confidence and activity levels had supported the increase in new business.

Employment and backlogs

Strong growth of activity and new business did not prevent London private sector firms from cutting their staffing levels further in March. Employment decreased for the fifth consecutive month, albeit at a modest pace. Lower payroll numbers were recorded in both the manufacturing and service sectors.

Correspondingly, there was a modest rise in backlogs of work during March. The increase in outstanding business was the first in six months and in contrast to a reduction across the UK as a whole.

Input and output prices

Input costs continued to rise in March, with a number of panellists commenting on higher fuel prices. The rate of cost inflation remained solid, albeit weaker than in February and below the UK average.

Companies attempted to offset part of the rise in their input prices by raising their charges in March. The increase in selling prices was the first since August 2011 and at a solid pace. Manufacturers indicated a stronger rise in output prices than service providers.


13/04/2012

gbpusd 4hrs I'm long £/$

U.K. factory-output prices and raw material costs rose more than economists forecast in March, suggesting inflation pressures remain in the economy. The price of goods at factory gates increased 0.6 percent from February, the Office for National Statistics said today in London. The median forecast of 20 economists in a Bloomberg News survey was for a 0.5 percent gain. Raw material costs rose 1.9 percent, exceeding a median estimate of 1.4 percent. While Bank of England Governor Mervyn King maintains the U.K. economy’s predicament still feels “like a crisis,” policy makers Martin Weale and Spencer

KEY FINDINGS

March data pointed to a marked monthly expansion in total commercial development activity, that was the strongest in just over two years. Improving trends in both private and public sector commercial development activity supported overall growth. Work on private contracts increased for the third month running, while public activity rose for the first time since February 2010.

Approximately 25% of commercial developers recorded an increase in overall activity in the month, compared to 12% indicating a decline. The Total Commercial Development Activity Index, a net balance monitoring the overall performance of the UK commercial property sector, registered +13.1% in March, from -3.6% in February.

FUTURE EXPECTATIONS

UK commercial developers were again optimistic Three month outlook for activity in March. Posting +8.7%, from +8.8% in February, the degree of positive sentiment was broadly unchanged on the month. Approximately 18% of respondents expect activity to increase over the next three months, compared to 10% anticipating a fall. Anticipated improvements in economic conditions were forecast by panellists to be the main driver of activity over the next three months.

SUMMARY OF ACTIVITY

Commercial development activity grew for the first time in nine months during March, supported by expansions in both public and private sector output. Six of the nine sectors monitored posted increases in activity. The strongest expansion was recorded for industrial/warehouse related projects.Nonetheless, continuing the recent trend, the weaker performances tended to be seen for public sector sourced work. Two of these categories registered contractions, while public new build activity was unchanged on the month.

http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9430