The Welsh private sector has seen its strong uptick in output in a year, shows new research from NatWest.
Its Wales business activity index 鈥 a seasonally adjusted index that measures the month-on-month change in the combined output of the manufacturing and service sectors 鈥 rose to 51.5 in May from 48.1 in April. Anything above 50 denotes growth.
Meanwhile, demand conditions remained subdued as new orders declined for the sixth month running. Lower new business dampened output expectations for the year ahead which were at their lowest for two-and-a-half years.
However, underlying data revealed that the rise in Welsh private sector activity was confined to the manufacturing sector, where goods producers noted that growth in new orders underscored the latest uptick. Though encouragingly, service providers recorded a softer rate of activity contraction.
Jess Shipman, chair of the NatWest Wales board, said
鈥淢ay data revealed a return to growth in many locations and Wales was one such area, witnessing a notable rebound in business activity driven by increased output in the manufacturing sector. Welsh firms adapted to more favourable market conditions, with recent data indicating improved demand highlighted by a fresh rise in orders.
鈥淗owever, despite the rebound in business requirements, this did not result in an increase in hiring activity. In fact, employment was reduced sharply, largely due to increases in national insurance contributions and the minimum wage, which adversely affected recruitment and staffing levels.
"Additionally, escalating labour costs were identified as a key factor behind the sharp rise in business expenses, ultimately leading to increased output prices. However, it is worth noting that inflation rates eased during the month and were largely consistent with national averages.鈥
The index also shows that Welsh private sector firms recorded a fresh rise in new business during May, thereby ending a six-month sequence of decline. Though only a modest rate of expansion, it was significant as it marked the only increase of the 12 monitored 海角视频 regions and nations.
The uptick in new work was centred on the manufacturing sector, where there were reports of increased customer demand, new product launches and renewed government confidence.
Surveyed panellists also indicated stronger optimism towards the year-ahead outlook for activity in May. The degree of confidence, after hitting a two-and-a-half year low in April, bounced back to a three-month high. Where an increase in business activity was anticipated, firms cited plans of new contract launches, heightened government confidence, competitive gains and strategic growth initiatives.
That said, of the 12 monitored regions and nations, positive sentiment was the third-weakest in Wales, with only firms in Northern Ireland and the North East exhibiting lower levels of optimism.
Employment levels at Welsh private sector firms fell further in May, thereby extending the current run of decrease to nine months. The rate of job shedding eased but remained steep and stronger than both the long-run and 海角视频 averages.
Surveyed respondents blamed that latest round of job reduction to redundancies caused by increased NI contributions and minimum wage, as well as retirements and departures.
Despite a renewed rise in incoming new business and falling employment in May, Welsh private sector firms had sufficient capacity to reduce outstanding business. A drop has now been recorded in each month since May 2022. The rate of depletion was faster than in April and rapid overall.
