NatWest has issued a warning about the future economic development of the North West despite a fourth consecutive monthly rise in business activity across the region.
Firms in the North West saw business activity rise for a fourth straight month in May, but the rate of growth eased slightly as inflows of new work edged lower, the latest 海角视频 Regional PMI survey from the bank showed.
On the price front, firms raised charges for goods and services at the slowest rate since February 2021, though the pace of inflation was still historically high amid the pass-through of growing salary costs.
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The headline North West PMI Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – came in at 52.3 in May, registering above the neutral 50.0 that separates growth from contraction for the fourth month running. That said, the index was down from a 12-month high of 53.5 in April and below the 海角视频 average (54.0).
Malcolm Buchanan, chair of NatWest North Regional Board, said: "Latest PMI data showed a fourth consecutive monthly rise in business activity levels across the North West, marking a sustained upturn in the region's economy.
"What's less encouraging is that growth slowed further behind the national rate amid a decline in inflows of new work, with higher interest rates, the still-rising cost of living and customer uncertainty having an adverse effect on demand.
"Indeed, companies have become less confident about growth prospects in the coming year. Although inflationary pressures have passed their peak, they remain historically high and are being supported in part by wage-price spiral effects, with companies raising charges for goods and services to offset growing wage demands.
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"So far, the region's labour market remains resilient, with employment rising once again in May, and at a rate that was broadly in line with the national average."
Businesses operating across the North West reported a decrease in inflows of new work for the first time in four months in May. Although only marginal, the decrease in new business contrasted with solid growth across the 海角视频 as a whole
Among the local businesses that recorded a decrease in new work, there were reports of cost of living pressures and uncertainty amongst customers.
In line with the trend seen across most 海角视频 regions and nations, the North West saw a drop in business confidence in May. Although still firmly in positive territory, with far more firms anticipating a rise in activity in the year ahead than those predicting a decline, expectations ticked down to the lowest level in 2023 so far and moved slightly below the long-run average. Interest rate rises were a factor weighing on sentiment, anecdotal evidence showed.
Latest data showed a further rise in employment across the North West private sector in May, maintaining a sequence of uninterrupted workforce growth that stretches back to March 2021. The pace of job creation eased slightly since April, but it was nevertheless broadly in line with both the year-to-date average and the national rate.
Underlying data showed that hiring activity was centred on the local services sector, with manufacturing payroll numbers declining.
The amount of outstanding business (i.e. work awaiting completion) at firms in the North West fell in May, the 12th month in a row in which this has been the case. Owing to a combination of reduced inflows of new work and increased staffing capacity, the rate of backlog depletion accelerated to the quickest since December last year. It was also one of the quickest among the 12 monitored regions, surpassed only by those recorded in Wales and Yorkshire & Humber.
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After slowing continuously for almost a year, down to a 27-month low in April, the rate of input price inflation faced by North West businesses ticked up in May. Where an increase in operating expenses was recorded, firms often cited the influence of higher salaries.
Service sector costs rose sharply and a much quicker rate than those faced by manufacturers, underlying data for the region showed.
Whilst firms across the North West continued to raise prices charged for goods and services in line with increasing cost burdens, they did so at the slowest rate since February 2021. The rate of output price inflation – which was the third-lowest nationally – nevertheless remained well above the long-run series average.
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