BUSINESS activity in Yorkshire and Humber increased at a faster rate in March, according to new research.

The Markit PMI report said there was, however, still a degree of excess capacity, hitting the number of staff in the region.

Input costs rose at a steep rate and above the UK average, but output charges continued to fall in line with strong market competition.

The business activity index – which measures the combined output of the region’s manufacturing and service sectors – reached its highest level in more than two years during March. At 56.5, the index improved on February’s 55.3 and signalled the continued recovery of growth after January’s weather-related slowdown.

Paul Smith, senior economist at Markit, said: “The region continues to recover from the weather-related disruptions seen at the start of 2010.

“Growth was at its highest in over two years in March, and confirms that the recovery remains on track heading into the second quarter.”

Higher activity mainly reflected an increase in new business placed with the region’s manufacturers and service providers, the report said.

Panellists on the Markit group highlighted recovering client confidence, new projects and increased export business from emerging markets. Overall growth of new work was the sharpest of 2010 so far, but continued to lag behing the rate of increase seen at the UK-wide level.

Companies operating in Yorkshire and Humber’s private sector continued to reduce staff. Job cuts have now been signalled for 23 successive months, although the latest decline was only marginal and the weakest in this period.

Lower employment in part reflected excess resources in the region. Backlogs of work were again reduced, extending the current period of contraction to 25 successive months.

Input price inflation reached its highest since September 2008, largely due to increased commodity costs and higher prices for oil-based products. A weak sterling exchange rate also contributed to inflation.

In contrast, output charges fell marginally for a second successive month. Strong competition remained the principal factor that depressed pricing power.

Published in the Yorkshire Post on 12 April 2010