Business activity expands at slowest pace for 27 months

According to the latest NatWest PMI® (purchasing managers’ index), private sector business activity in the North West of England grew at the slowest rate for 27 months in October.

The slowdown was underpinned by the weakest rise in new business since the current sequence of growth began in August 2016.

Meanwhile, the rate of job creation eased to a three-month low.

Input costs continued to rise at a faster rate than output prices, although the rate of charge inflation accelerated for the third consecutive month.

The headline NatWest North West Business Activity Index – a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors – fell from 55.6 in September to 51.8 in October.

This signalled a further rise in business activity across the region, albeit the weakest for 27 months.

Moreover, the rate of growth was slower than the UK average for the first time since July.

Behind the slower increase in business activity was a weaker rise in new work during October, notably, the rate of growth was modest and the slowest seen in the current 27-month sequence of expansion.

That said, the North West gained new business at a faster rate than the UK as a whole for the fifth month in a row.

Coinciding with the softer upturn in new work, capacity pressures appeared to ease during October.

Backlogs of work grew at the slowest rate in three months, rising at only a marginal pace overall.

At the same time, businesses increased payroll numbers at a softer rate in October.

Notably, the rate of employment growth edged down to a three-month low.

However, the region continued to hire staff at a faster rate than the UK average.

Panelists reported that higher wage costs caused another sharp increase in cost burdens during October.

The rate of input cost inflation picked up slightly since September and remained historically elevated.

As a result, companies increase their output charges at a faster rate, with the pace of inflation reaching a six-month high.

Sentiment towards output in one year’s time remained positive in the North West at the start of the fourth quarter.

That said, the level of confidence fell compared with September, and hit a four-month low.

Richard Topliss, chair, NatWest North regional board, said: “The North West economy continued to grow at the start of the fourth quarter of the year.

“There were increases in business activity and new orders, albeit at softer rates compared to September.

“The slowdown in output growth weighed on confidence as optimism towards future activity fell, though business sentiment remained strongly positive.”

NatWest economist Nick Stamenkovic, added: “Business activity fell to its lowest level since August 2016, driven by weaker new orders, dropping below the UK average for the first time since July.

“Companies continue to expand employment but the pace slowed to a three month low.”