The West Midlands is seeing a steep slowdown in growth, according to the West Midlands Purchasing Managers Economic Index for November.
Produced for the Royal Bank of Scotland by NTC Research, it says private sector output in the region increased at the weakest rate since October 2005.
RBS economist Julien Seetharamdoo said disappointing numbers of new orders the previous month had suggested the slowdown would continue.
"This has proved to be the case with output growth, though still positive, falling sharply in November," he noted.
"Sizeable spare capacity was also highlighted by the fastest fall in backlogs for over three years."
David Hersey, regional director of corporate banking for RBS in the West Midlands, added: "After the good news from the survey for most of 2007 the results for November make for some uncomfortable reading. However we have noted previously the resilience within the local private sector economy and trust that this will prevail as we head into 2008."
The seasonally adjusted Business Activity Index registered 52.6 - anything over 50 represents growth - and has now fallen by 7.9 points in the past two months, described as "unprecedented in the survey's history".
The report goes on: "The latest easing in activity growth was broad-based across manufacturing and services.
"Driving the weakening in activity growth in November was a slight fall in the volume
of incoming new business, the first monthly contraction in over four-and-a-half years. The services economy was the main source of weakness, with a number of firms mentioning that recent financial instability had been a contributory factor. In contrast, manufacturing new orders continued to rise.
"A fall in the volume of new contracts placed during November, combined with output growth, allowed firms to focus on existing workloads. As a result, backlogs declined at the fastest rate for over three years. Moreover, the contraction was the steepest indicated among all twelve UK regions.
"Private sector employment in the West Midlands contracted on average for the second month running in November, although the overall decline was only very slight. Further job creation at manufacturers was offset by cuts at service providers.
"Input price inflation in the West Midlands private sector economy accelerated to a four-month high in November. Fuel and foodstuffs were the key sources of rising inflationary pressure although, of the twelve UK regions, all except the North West registered a stronger rate of input cost inflation than the West Midlands. In response to increased costs, firms in the region raised selling prices at a stronger rate than in October."