Yorkshire companies see private sector activity hit three-month high

The private sector economy in Yorkshire and the Humber grew at the fastest pace in three months during December, according to the latest NatWest PMI data.

Regional firms posted increases in both output and new orders, despite seeing a slow down in job creation.

Output charge inflation also accelerated to a 12-month high, as firms sought to offset rising input costs.

The NatWest Yorkshire & Humber Business Activity Index, a seasonally adjusted index that measures month-on-month changes in the combined output of the region’s manufacturing and service sectors, rose to 53.3 in December from 52.9 in November.

The latest reading was the highest recorded in three months and compared with a UK-wide average of 51.4.

By sector, December saw increases in activity at both manufacturers and service providers.

Growth in new orders placed with Yorkshire and the Humber companies played a major role in driving the upturn in business activity at the end of 2018. New business has now risen on a monthly basis for almost two-and-a-half years, with the latest increase the fastest since last September.

With demand for the region’s goods and services continuing to rise, firms in Yorkshire and the Humber also took on additional staff. However, employment growth was the weakest since last March.

Input costs in the region rose at a slightly faster pace than November’s 26-month low. The rate of inflation was faster than across the UK as a whole.

Respondents reported higher prices for energy, with the negative effect of the weaker pound also noted. Firms sought to offset greater cost burdens by raising their selling prices at the fastest rate in 12 months.

Finally, data showed a further deterioration in firms’ confidence for output over the coming year, with sentiment declining to a 29-month low. Despite this, respondents still anticipated output to increase over the coming year, with investments in capacity and new product initiatives some of the key factors expected to support growth.

Richard Topliss, chair of NatWest North Regional Board, said: “Businesses operating in Yorkshire & Humber maintained a growth advantage over the rest of the UK during December. The latest PMI report showed the region’s private sector output rising at the quickest rate in three months, underpinned by strong demand for goods and services.

“Moreover, the upturn continued to translate into new jobs, with December marking the twenty-eighth month of employment growth in Yorkshire & Humber. That said, the rate of workforce expansion eased to its slowest since last March.”

Topliss added: “Adding to the negative dataflow was the survey’s measure of business confidence – which looks at firms’ expectations for activity in the year ahead – which deteriorated to a 29-month low.

“One of the main causes for concern was the presence of sustained cost pressures facing businesses, linked partly to the rising cost of energy and other raw materials. Firms were able to shift some of the burden of higher costs onto customers via higher selling prices which rose at the fastest pace in 12 months; however such a strategy can lead to a loss of competitiveness if continued into the long term.”