Bosses across the East Midlands have reported a further drop in business activity and a tightening workforce as the cost of living crisis continues.
However they said the price of finished products was coming down, despite a rise in input costs. The findings come in the latest NatWest East Midlands PMI Business Activity Index – a monthly survey of the region’s business owners and managing directors.
The August data signalled a solid contraction in business activity, and the fastest fall in output since December 2022.
The decline was among the sharpest of 12 monitored º£½ÇÊÓƵ regions, with firms linking the decrease to weak demand and a further drop in new orders.
The survey suggested the pace of decline quickened from that seen in July and was at its steepest since the start of the year. Some businesses said weak demand stemmed from higher interest rates causing increased hesitancy among customers to place orders.
The August data also signalled a second successive monthly decrease in staffing numbers – with firms shedding jobs at the fastest rate since early-2021.
Lower employment was attributed to redundancies caused by lower new orders and cost-cutting, and leavers not being replaced – some of whom left for higher wages elsewhere.
Although the º£½ÇÊÓƵ as a whole continued to record a rise in employment, the increase was only marginal overall.
At the same time East Midlands companies said input costs for service sector companies – for things such as utility bills, wages and higher interest rates on financing – continued to rise.
However the amount manufacturers were paying for materials and parts was dropping and the rising cost of finished goods and services was slowing.
There was positive news with bosses showing higher expectations for the coming 12 months, with expectations of greater investment, new product development and hopes of stronger demand.
Rashel Chowdhury, who sits on the NatWest Midlands and East regional board, said: “East Midlands firms signalled further challenging demand conditions as the third quarter progressed.
“New business contracted at a sharper rate which drove a renewed drop in output. Higher interest rates and a return of hikes in fuel, utility and material costs exacerbated strain on customer spending and sparked an acceleration in input cost inflation.
"Efforts to stimulate demand were evident in another slowdown in the pace of selling price inflation, with charges rising at the weakest rate since the start of 2021. At the same time, burgeoning spare capacity led firms to pursue cost-cutting tactics as the decrease in employment gained momentum.
"Although firms were more optimistic in the year-ahead outlook, the degree of confidence remained historically soft amid ongoing concerns regarding the stability of demand."
