BUSINESS activity in the south west stabilised in October, a report has found, offering "encouraging signs". 

The NatWest south west PMI Business Activity Index revealed business activity remained largely unchanged since September amid a softer drop in sales.

The index is a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors.

Bournemouth Echo:

October’s index figure was 50.1 which is up slightly from 47.8 in September which analysts said shows broadly stable levels of business activity across the region following a four-month period of decline.

Paul Edwards, chair of the NatWest south west regional board, said: "The latest PMI survey brought some encouraging signs that business conditions steadied across the south west at the start of the fourth quarter. Firms registered stable activity following four months of decline, and new business fell at the softest rate in five months.

“Combined with indications that overall cost pressures are easing, this helped to boost business confidence around the 12-month outlook for output.

"Nevertheless, both input costs and selling prices continued to increase at elevated rates as companies reported further hikes in staff, raw material and energy costs.

"There are still signs of spare capacity in the sector too, with backlogs of work declining again, which contributed to a modest drop in employment."

The report said the index continued to signal optimism among south west private sector firms when assessing the 12-month outlook for output in October.

It said: "Notably, the level of positive sentiment picked up from September's nine-month low and was slightly above the series average.

"Upbeat forecasts were generally underpinned by hopes that customer demand will revive and boost sales. Planned company expansions were also mentioned by some firms."

"While business confidence softened slightly at the national level, it was in line with that recorded in the south west."

Mr Edwards added: "Overall, the more stable picture is a positive development, but firmer demand conditions and a sustained improvement in sales will be needed to put the sector on a solid growth footing."