Growth of Yorkshire business activity eases to slowest in 27 months

Yorkshire and the Humber experienced an increase in business activity during October, and at a quicker rate than the UK overall, according to the NatWest Yorkshire & Humber Business Activity Index.

The rate of expansion, however, was was the slowest in the current 27-month sequence of rising output.

Companies in the region reported greater demand for goods and services, with private sector employment rising. However, local businesses continued to face rising cost pressures, which resulted in prices charged for goods and services being raised to protect margins.

The NatWest Yorkshire & Humber Business Activity Index is a seasonally adjusted index that measures month-on-month changes in the combined output of the region’s manufacturing and service sectors.

The index posted above the neutral 50.0 level at 52.7 in October, down from 55.2 in September, to signal a moderate increase in business activity that outpaced the UK average.

By sector, service providers recorded a weaker rise in activity than manufacturers.

As a result of the expansion of business activity, there was a modest increase in new orders. October saw inflows of new work rise for the twenty-seventh successive month, thought it was at the slowest rate in this sequence.

As for the labour market, October’s survey data also showed that the increase job creation in Yorkshire and the Humber was steeper than that seen across the UK as a whole.

The rate of contraction was the most marked since April 2016 and more severe than that for the UK as a whole. Average prices charged by businesses operating in Yorkshire and the Humber increased in October.

The rate of inflation was at a four-month low but still sharp when compared to the series average. There was a divergence on the sector level with selling prices falling among service providers but rising among manufacturers.

Behind the rise in selling charges was a marked increase in input costs. Higher raw material costs and a weaker pound were listed as reasons cost burdens had increased. Despite this, the rate of input cost inflation eased in October to the weakest in five months.

October’s data showed an improvement in local firms’ confidence towards the year-ahead outlook for activity, to the highest in three months. Rising business activity and forecast sales growth were listed as reasons to be confident by respondents.

Richard Topliss, chair of NatWest North Regional Board, said: “Business activity growth across Yorkshire & Humber decelerated in October. Driven by slower new business flows and a drop in work outstanding, the rate of output expansion eased to the slowest in 27 months.

“Notably, order book volumes increased at the slowest rate since they fell in July 2016 in the aftermath of the Brexit referendum.

“On the labour market front, Yorkshire & Humber private sector jobs solidly increased in October, and faster than across the UK as a whole. According to panellists, greater customer demand as well as forecasts of increasing new business supported the expansion in staffing numbers.”

Topliss added: “Input price inflation in the Yorkshire & Humber region remained elevated as weaker sterling negatively affected raw material prices (notably steel). Contrastingly, despite both manufacturers and service providers facing similar rates of input cost inflation, service providers decreased their output charges whilst manufacturers in the region raised selling costs during October.”   

Nick Stamenkovic, NatWest economist, said: “Business activity slowed further in Yorkshire and Humber, led by the services sector. Still, firms continue to increase employment and were more optimistic about the outlook”.  

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