Business activity in the West Midlands saw the strongest growth for four months in August, according to new research.

Underpinning the rise in activity was an increase in new business and a depletion of outstanding work by the regions private sector firms, following a marginal decrease in the previous survey period, according to the latest Lloyds TSB West Midlands PMI report.

A marked expansion of activity in the service sector offset weakness in manufacturing, the survey said.

The headline Business Activity Index posted 54.2, up from 50.9 in July.

That was above the UK reading of 52.6 and signalled a solid rate of expansion in output. A reading below 50 indicates a decline on the previous month.

Andy Youngman, area director for Lloyds TSB Commercial in Birmingham, said: “A welcome acceleration in business activity growth placed the West Midlands among the top performing regions in the UK during August.

“There was some indication that price discounting helped support a return of new business growth, as output charges decreased at the fastest rate since September 2009.

“A boost to the region’s labour market was provided by a further rise in employment, with the pace of job creation remaining above the national average despite slowing since July.”

Panellists attributed an increase in employment to higher workloads. Although easing from July’s four-month high, the rate of expansion in staffing levels remained solid.

Increased headcounts helped firms make further inroads into their backlogs of work. The latest decrease in outstanding business was the fourth in consecutive months.

Input prices faced by private sector firms increased slightly during August, following a fall in the previous month. Fuel, salaries and raw materials were identified as factors contributing to the rise.

In contrast, output prices declined further, with the latest fall being the sharpest in just under three years. There were a number of reports from panellists linking lower charges to competitive pressures.