THE latest Purchasing Managers' Index report for the south west has shown that growth in output in October surged to its fastest in almost seven years and demand continued to strengthen.

The report, produced for The Royal Bank of Scotland by NTC Research, also revealed that employment growth picked up to its strongest since March 2001.

However, although the rate of input price inflation was relatively stable, companies across the region continued to cut average output charges, suggesting that profit margins remained under some pressure.

Companies in the south west reported that business activity rose for the seventh month running during October and the rate of expansion was the strongest since November 1996.

Increased volumes of new business were attributed to the strength of regional demand, which helped many companies gain new opportunities for business development. In some cases, large Ministry of Defence contracts helped boost new order books.

Job creation accelerated in October, as the strength of the regional economy influenced employment decisions.

The survey showed a rise in the proportion of private sector firms that created new jobs and the pace of hiring was above that recorded across the national economy.

October's survey data suggested that pressure on profit margins was maintained at regional firms.

Commenting on the survey's results, Andrew McLaughlin, deputy chief economist at The Royal Bank of Scotland, said: "The south west continued to build on its recently encouraging performances, with growth of output rising to the fastest in nearly seven years.

"Moreover, with latest data suggesting that the south west remains one of the top performing regions in the UK, the area should hopefully become a hotbed for increased outside investment.

"Of particular encouragement was that staffing levels expanded at their fastest rate since March 2001.

"With no reason to suggest a substantial slowdown in workload growth, employment expansion may gather pace."

o The South West Regional Development Agency has launched its connectingsw.net campaign, aimed at increasing demand for information and communication technology across the region.

Connectingsw.net was created as a web-based resource for people involved in the continuing development of ICT and broadband in the region.

It also shows how broadband can help speed up communication and make businesses in the south west more efficient.

The website, due for launch in early 2004, will provide a central source of information, details of broadband funding opportunities and an events diary.