Cooling demand for West Midlands goods and services restricted output growth and halted hiring in July, according to newly published data.
The latest NatWest PMI report showed that, despite quickening since June, the rate of input cost inflation was well below most of those seen over the past two-and-a-half years. Coupled with faltering demand, this led to the weakest increase in selling prices for 29 months.
The report, which is a seasonally adjusted index that measures the month-on-month change in the combined output of the region's manufacturing and service sectors, fell from 52.6 in June to 51.3 in July.
The latest reading signalled a sixth successive rise in output but the weakest over this period. Growth was attributed to the launch of new products and services and demand resilience.
Dampening the expansion were signs of an economic slowdown, client destocking and unfavourable weather.
Private sector companies in the West Midlands indicated a further increase in new work intakes during July, stretching the current sequence of expansion to six months.
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Where growth was signalled, panellists mentioned the offering of new services, demand resilience and greater client bases.
Growth was reportedly restricted by destocking efforts at customers, signs of an economic slowdown, elevated borrowing costs and unfavourable weather. Private sector employment in the West Midlands stagnated in July, after increasing in each of the past 28 months.
Some companies took on extra staff, owing to anticipated improvements in sales and the replacement of workers who had resigned in late-2022. Others trimmed payroll numbers due to automation, wage cost pressures and efforts to improve cash flows.
The trend for jobs in the West Midlands compared with growth in nine regions and reductions in two areas (North East and East Midlands).
July data pointed to a marked increase in prices charged for goods and services in the West Midlands. Although historically elevated, the rate of inflation eased to the weakest since February 2021.
Some panellists suggested that their fees had risen due to ongoing cost rises and the passing on of previously absorbed hikes to energy prices.
Others lowered their charges amid subdued demand conditions and savings made from reduced raw material prices. Local output prices rose at a slower pace than the º£½ÇÊÓƵ average.
After easing in each of the prior seven months, the rate of input cost inflation facing private sector companies in the West Midlands quickened during July.
Although sharp, the latest increase in expenses was considerably less pronounced than those seen over the past two-and-a-half years. Companies noted greater pressure from salaries and wages but lower prices for freight, raw materials and utilities.
The West Midlands came eighth in the regional rankings for input cost inflation. As has been the case on a monthly basis since last December, West Midlands firms noted a decline in outstanding business volumes during July.
Despite softening since June, the rate of backlog depletion was historically marked. According to survey participants, subdued sales growth facilitated the reduction in unfinished business.
West Midlands firms anticipate output levels to be higher in one year's time, with the overall degree of optimism strengthening from June's six-month low.
Upbeat forecasts stemmed from planned investment in staff and systems, expected gains in market shares and hopes that inflation would retreat. The West Midlands recorded the highest level of positive sentiment out of the 12 monitored º£½ÇÊÓƵ regions and nations.
Rashel Chowdhury, from NatWest's Midlands and East regional board, said: "West Midlands firms again indicated that client destocking and signs of an economic slowdown restricted demand for their goods and services in July.
"Although encouraging that growth here was sustained while ten other monitored º£½ÇÊÓƵ regions posted contraction, the deceleration meant that economic activity expanded only slightly and job creation stalled.
"Encouragingly, however, dwindling demand helped curb output charge inflation and businesses maintained an optimistic view towards future activity."
