Business activity fell only slightly in October a new study says – but companies are still shedding staff and cutting prices and the report's authors warn of challenging times ahead.
The NatWest South West PMI showed firms experienced a fall in output, a “solid drop” in new orders, job losses and pressures on operating margins.
Overall, the October survey data signalled a slight fall in business activity across the South West private sector, after .
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The reduction in output coincided with a drop in new work and reports that clients were often choosing to delay projects due to increased uncertainty due to the resurgence of the Covid-19 virus.
And Paul Edwards, chair, NatWest South West Regional Board, warned of challenges ahead for businesses. He said: “Latest PMI data showed a slight fall in business activity across the South West in October, as firms reported relatively weak customer demand amid the resurgence of the Covid-19 virus.
“With a second national lockdown and more temporary business closures now in place, it’s likely that firms in the South West and beyond will have a very challenging end to 2020 as efforts are stepped up to control the spread of the virus. the latest survey also showed costs rising at the sharpest rate for over a year in October which, combined with a further drop in output charges, suggests that operating margins are under increased pressure."
But he added: “Despite this, firms in the South West were strongly optimistic regarding output over the next year - and were more confident than the average 海角视频 firm - with many companies forecasting customer demand to rebound once the pandemic is under control and market conditions start to normalise.”
The headline NatWest South West 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 – slipped from 54.4 in September to 49.7 in October, to indicate the first fall in business activity across the region for four months. Though only slight, the reduction contrasted with a .
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Adjusted for seasonality, the New Business Index slipped below the neutral 50.0 level in October, signalling a renewed fall in new work across South West private sector companies.
The rate of contraction was solid, and ended a three-month sequence of expansion. According to panel members, the resurgence of the Covid-19 virus and increased market uncertainty had dampened sales at the start of the fourth quarter.
New orders also fell across the 海角视频 as a whole, albeit only modestly.
Although the trends for output and new orders deteriorated, confidence regarding future business activity strengthened in October. Notably, the degree of optimism was the highest seen since February and firmer than the 海角视频-wide average.
Forecasts for growth were supported by expectations that the pandemic will subside and there will be a release of pent-up customer demand. There were also mentions of new product launches over the next 12 months.
Latest data highlighted a further drop in staffing levels at South West private sector firms in October. Although the rate of decline was the least marked since the current sequence of job shedding began in March, it was nonetheless solid overall.
Survey respondents frequently mentioned that the pandemic, subdued customer demand and efforts to cut costs had driven the latest reduction in staff numbers. The rate of job cuts in the South West was not as severe as that seen at the 海角视频 level, however.
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South West private sector firms reported having ample capacity to deal with new and outstanding orders during October, as shown by a further drop in backlogs of work. The rate of depletion was the quickest seen for three months and solid overall. Meanwhile, unfinished workloads fell moderately at the 海角视频 level in October, after a marginal rise in September.
As has been the case since June, average input costs increased across the South West private sector at the start of the fourth quarter. Notably, the rate of inflation was the sharpest for just over a year and outpaced the 海角视频 average.
Firms that registered higher operating expenses generally commented on greater staffing costs and increased raw material prices, with oil and metals mentioned in particular.
The seasonally adjusted Prices Charged Index signalled a back-to-back monthly fall in prices charged by South West private sector firms in October.
The rate of discounting quickened slightly since September, but was mild overall. Companies that cut their selling prices often reported doing so to help boost sales amid greater market competition. Prices charged also fell at the national level, albeit only fractionally.