North West maintains encouraging growth in business activity, latest stats reveal

Business activity continued to rise at a solid pace across the North West during May, supported by improving demand conditions, latest Regional PMI survey data from NatWest showed.

The upturn coincided with stronger confidence towards the outlook, which, in turn, contributed to a pick up in employment growth. Cost pressures, meanwhile subsided somewhat, after having spiked in April with the change to the National Minimum Wage.

The headline North West PMI 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 above the 50.0 mark that separates growth from contraction for the fifth month running in May, coming in at 53.4.

Although down slightly from a two-year high of 54.0 in April, the latest reading was still above the UK average of 53.0.

A fifth consecutive monthly increase in new business across the North West in May pointed to a sustained improvement in underlying demand facing the region’s businesses. The rate of new order growth was strong and the second-fastest among the 12 nations and regions monitored by the survey.

The upturn was supported by a sustained and sharp rise in the services sector, which was accompanied by a fresh expansion in manufacturing new orders. Firms cited more confidence among clients and successful marketing campaigns.

May’s survey showed a notable improvement in business expectations across the North West private sector.

Firms were the most optimistic about their growth prospects in the coming year since August 2021. A cooling of inflation and cuts to interest rates were two factors that businesses hoped would lead to an expansion in activity. Local manufacturers were particularly upbeat about the outlook, underlying data showed.

May saw private sector employment in the North West return to growth, following a slight decline in workforce numbers at the start of the second quarter.
Furthermore, the rate of job creation was the strongest seen since August 2022 and the second-fastest of the 12 monitored nations and regions, behind that seen in Northern Ireland. Where a rise was recorded, panellists remarked on increased workloads and strategic hires.

Firms in the North West once again reported a decrease in outstanding business – ie work received but not yet completed – as has been the case in every month throughout the past two years. The rate at which backlogs were depleted accelerated for the third month in a row to the fastest since January. It was also much faster than the UK-wide average, pointing to relatively low business capacity pressures in the region.

Following a spike in costs in April, which was linked to changes in the National Minimum Wage – both its level and coverage – the rate of input price inflation faced by firms in the North West eased sharply to a six-month low in May.

It was also one of the slowest among the 12 monitored nations and regions. Where a rise in operating costs was recorded, firms cited higher prices paid for a range of materials, including copper, alongside wage demands.

Firms in the North West raised average prices charged for goods and services only modestly in May. The rate of inflation stayed close to April’s 43-month low and was below the average seen since the series began in 1999. Moreover, it was weakest nationally for the second month running.

Malcolm Buchanan

Malcolm Buchanan, Chair of NatWest North Regional Board,said: “May’s PMI survey makes for encouraging reading.

“Growth is becoming more entrenched across the North West private sector, as we see business activity rising for the fifth month running on the back improving underlying demand.

“Companies are looking to the future with optimism, and this positive mood, alongside greater workloads, has translated into a solid rise in employment in May.”

He added: “There was also some relief for local firms on the cost front, with April’s spike in input prices followed up by a much more moderate increase in May.”