North West firms report ‘modest growth’ following ‘lull in demand’
North West businesses experienced only ‘modest growth’ in July as inflows of new work in the region fell for the first time in almost a year-and-a-half.
According to the latest Regional PMI data from NatWest the amount of new business placed with firms in the North West fell during July, ending a 16-month sequence of growth and highlighting growing headwinds to demand.
Several surveyed companies commented on reluctance among customers due to a backdrop of uncertainty, sharply rising prices and supply chain frictions.
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 – registered 51.1 in July, down slightly from June’s 51.2.
This was the lowest reading for six months and compared with a UK-wide figure of 52.1.
Although only modest, the decline in inflows of new work – which was centred on the region’s manufacturing sector – contrasted with a sustained (albeit modest) rise across the UK as a whole.
Latest data showed a further increase in employment across the North West private sector in July, as local firms reported filling vacancies and taking on additional staff to expand capacity.
The rate of jobs growth was little-changed from June’s 16-month low and below the UK-wide average, although it was still robust by historical standards.
July saw backlogs of work (i.e. new orders received but not yet completed) at firms in the North West fall for the third time in the past four months, signalling waning pressure on business capacity across the region.
Furthermore, with intakes of new work in decline and firms continuing to boost workforce numbers, the rate at which work-in-hand decreased accelerated notably to the quickest since January 2021 and was the second-fastest nationally behind that recorded in Northern Ireland.
Richard Topliss, Chairman of NatWest North Regional Board, said: “Growth of activity in July was only modest and largely achieved through progress on backlogs of work built up in previous months.
“But with those backlogs starting to fall more rapidly, there is a threat to near-term output prospects unless demand revives.
“Firms in the region are holding on to hopes that the lull in demand will be temporary and that activity will increase over the next 12 months, but that’s contingent on a number of things, not least developments in inflation.
“Rates of increase in firms’ costs and output prices remained steep in July, although they continued to retreat from their record highs earlier in the year due in part to the effects of weakening demand.”