NW business activity rises, but confidence falls, new figures show

According to the latest NatWest North West PMI® published today, business activity rose at a quicker pace in June.

The rate of growth was the fastest since February, driven by more robust client demand.

Similarly, new business increased at the strongest rate for four months, leading to higher backlogs for the first time since February.

In response to greater pressure on capacity, firms also increased their staffing levels.

Meanwhile, prices rose sharply, with input cost inflation accelerating to the quickest since September 2017.

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 – posted 55.1 in June, up from May’s 22-month low of 52.3.

The rise in business activity signalled by the latest figure was the strongest since February, with panelists linking the increase to greater domestic and foreign client demand.

The upturn was broadly in line with the average seen across the UK as a whole.

In line with the trend seen for output, new business received by companies operating in the North West increased at the quickest pace for four months.

A number of survey respondents noted that higher new order volumes were due to more robust client demand and a rise in new business from abroad.

Private sector employment rose for the second successive month in June, with the rate of job creation accelerating to a four-month high.

The solid increase in staffing levels was attributed to greater business requirements and planned investment in capacity expansion.

The faster rise in new orders led to greater pressure being placed on capacity.

The level of outstanding business increased for the first time since February.

Moreover, the rate of accumulation was the quickest in 12 months.

Average prices paid by private sector firms in the North West increased at a marked pace in June.

The rate of inflation accelerated to the fastest since September 2017.

Anecdotal evidence stated that the latest rise was driven by higher raw material and fuel costs.

In line with stronger demand conditions, panelists reportedly partly passed on higher cost burdens to clients through greater output charges.

The rate of inflation quickened to a sharp pace.

Although new order growth accelerated in June, the degree of optimism dipped to a six-month low.

The level of confidence was strong nonetheless, with panelists attributing positive expectations to planned investment.

Richard Topliss, chair, NatWest North regional board, said: “The latest North West data signalled a strong monthly output expansion in June, with the rate of growth accelerating to a four-month high.

“Similarly, new business expanded further on the back of stronger client demand.

“Greater business requirements also fed through to capacity pressures, with backlogs rising for the first time since February and at the fastest rate in a year.”

He added: “As has been seen across the 12 monitored UK regions, input costs rose markedly. Higher prices for raw materials and fuel were partly passed on to clients through a sharper rise in output charges.

“Business confidence moderated in June, with expectations for the coming year dipping to a six-month low.

“Although many panelists attributed the strong level of positive sentiment to planned investment, others noted concerns surrounding the longevity of client demand.”