‘Economy continues to strengthen’ despite squeeze from rising costs

The North West region recorded its fastest upturn in business activity since July last year, the latest NatWest PMI surveys of UK businesses have shown.

The economy showed strong signs of recovery in April despite increasing price pressures, with average charges for goods and services rising at a record rate as local firms sought to offset soaring costs.

Employment levels continued to rise strongly in the region, although the pace of job creation eased to the slowest this year, in line with a drop in business confidence towards the outlook.

The headline North West Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – climbed to a nine-month high of 58.7 in April, up from 56.9 in March.

This signalled a sharp and accelerated rate of growth, and went against the broader UK-wide trend.

Latest data showed a sustained improvement in the level of demand faced by firms in the North West, with inflows of new work rising for the fourteenth month running amid reports of growing sales opportunities.

The rate of expansion eased to a three-month low, although it remained robust by historical standards and was quicker than the UK-wide average.

Underlying data showed increases in new business across the region’s manufacturers and services firms, with the latter recording the more marked rise.

April’s survey showed that, on balance, firms in the North West anticipated a rise in activity over the next 12 months.

This reflected hopes of a continued upturn in demand and improving investment prospects.

Expectations did, however, ease to a four-month low, as businesses voiced concerned about rising prices and associated squeeze on purchasing power.

Firms across the North West faced yet another steep rise in operating expenses in April.

Furthermore, having accelerated for the third month in a row, the rate of input price inflation surpassed last November’s previous survey-record high. Energy, labour, raw materials, and transportation were all cited as key sources of cost inflation during the month.

Richard Topliss, Chairman of NatWest North Regional Board, said: “The North West economy carried strong momentum into the second quarter of the year, with the region’s business activity index pointing to the strongest growth for nine months in April.

“Less positively, however, firms’ optimism towards the outlook waned as concerns grew about the sustainability of the current rate of growth, especially given the strong inflationary environment and the associated cost-of-living squeeze.

“While many local firms continued to take on new staff, the rate of job creation eased to the weakest so far in 2022 as firms showed some signs of reining in their hiring plans amid record cost and price increases.”