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Private sector activity in the Yorkshire and Humber area fell again in July despite a growth in business confidence, a new survey suggests.

The NatWest Yorkshire and Humber Business Activity Index, which measures region’s manufacturing and service sectors, fell to 48.0 in July, from 49.6 in June. Scores below 50 denote a contraction in the regional economy.

The decline was the sharpest of all 12 monitored parts of the º£½ÇÊÓƵ, with businesses in the region pointing to weak demand in some areas. Workforce numbers across the local private sector also fell in July, extending a sequence of job shedding to eight months.

But business confidence grew in the area as companies highlighted expansion plans and strong sales pipelines.

Malcolm Buchanan, chair of the NatWest Regional Board, said: “Although July’s deterioration in new orders, in tandem with accelerated job losses, perhaps rings some alarm bells, local businesses are not paring back their expectations for output over the coming year, suggesting the latest month of weakness might be down to some temporary factors. In fact, business confidence ticked up to a four-month high in July, with companies noting strong sales pipelines.

“Compared to earlier in the year, inflationary pressures across the region have cooled. Cost inflation is less intense, and companies aren’t having to lift prices by as much to protect margins. This should allow for companies to offer more competitive prices, which in turn can help lift demand and drive local economic growth.”

A separate report has also pointed to a fall in hiring activity in July as the º£½ÇÊÓƵ jobs market was weighed down by concerns over the economic outlook and increased labour costs. The monthly KPMG and REC report on jobs showed a “further steep decline” in permanent staff appointment in July, while growth in starting salaries also slowed to its lowest level for more than four years as firms tightened recruitment budgets.

Jon Holt, group chief executive and º£½ÇÊÓƵ senior partner at KPMG, said: “The labour market cooled in July as chief execs held back from increasing their recruitment budgets. Economic uncertainty, the complexities of AI adoption and global headwinds are all weighing on business planning.”