A monthly survey of East Midlands business leaders suggests demand for goods and services has slowed at a faster pace than before as output costs rise and the number of working people falls.
The East Midlands PMI business activity index for September signalled a solid fall in output from the region’s firms. The index, based on a survey of business leaders, suggested the rate of contraction was the quickest in 2023 so far, and worse than the º£½ÇÊÓƵ average – and blamed weak demand, the cost-of-living crisis and continuing economic uncertainty.
East Midlands firms said they recorded another solid decrease in new orders in September – which they said was linked to weak client demand amid economic uncertainty and reduced purchasing power from customers as cost-of-living issues hampered sales.
The solid fall in new orders was sharper than that seen across the º£½ÇÊÓƵ as a whole, where the pace of contraction slowed on the month.
However the September data signalled further upbeat expectations regarding the outlook for output over the coming year. August. Although weaker than the long-run series average, the level of optimism across the East midlands was slightly higher than the º£½ÇÊÓƵ average.
At sector level, service providers saw business confidence slip slightly, whereas manufacturers recorded stronger sentiment.
Staffing numbers at East Midlands firms contracted for the third month running in September, with the pace of job shedding accelerating to the sharpest since August 2020.
Lower employment was attributed to the non-replacement of voluntary leavers amid reduced new orders and higher wage costs. The decrease in workforce numbers was steeper than the º£½ÇÊÓƵ average.
Service providers saw employment broadly unchanged on the month, but manufacturers drove the overall decline in workforce numbers.
East Midlands firms recorded another steep contraction in backlogs of work at the end of the third quarter.
Anecdotal evidence suggested that the decrease in outstanding business was due to lower new orders and sufficient capacity to process incoming work. The rate of decline was slightly faster than the º£½ÇÊÓƵ average, with manufacturers in the region leading the drop in incomplete work.
East Midlands private sector companies also recorded a sharp rise in selling prices in September – The rate of charge inflation was the quickest for three months and faster than the º£½ÇÊÓƵ average.
While manufacturers left selling prices broadly unchanged, however, service providers recorded a steep uptick in charges.
Rashel Chowdhury, NatWest Midlands and East Regional Board, said: "September data signalled a worsening of business conditions at the end of the third quarter, as business activity fell at a faster pace.
"Output declined at the sharpest rate in 2023 so far amid a solid reduction in new orders, as the cost-of-living crisis and strain on customer spending led to a slump in client demand.
"Inflationary pressures remained elevated, with selling prices rising at a faster pace despite dwindling sales.
"Cost cutting initiatives were in place, however, as voluntary leavers were not replaced and employment dropped at the steepest rate since August 2020.
"Lower staffing numbers reflected below-average confidence levels, as expectations remained historically subdued amid concerns demand will prove difficult to stimulate over the coming year due to high inflation and economic uncertainty."
