The number of UK sectors reporting falls in demand increased for a fourth successive month in August, according to the latest Bank of Scotland Sector Tracker.
Of the 14 sectors monitored, 11 saw new order demand fall – one more than in July and the highest number since June 2020.
Tourism and recreation (38 vs. 42.3 in July) saw the fastest fall in demand, as consumers continued to rein in discretionary spending.
A reading on the tracker above 50 indicates sector expansion, while below that indicates contraction.
Each of the sectors which saw new orders contract also saw output decrease (11 out of 14 sectors in August vs. nine in July).
Technology equipment manufacturers (58.1 vs. 52.4 in July), providers of software services (57.8 vs. 58) and metals and mining firms (51 vs. 34.3), were the only sectors to see both demand and output grow.
Elsewhere, the tracker showed that slower rises in material and logistics costs helped bring overall input cost inflation (76.6 vs. 78.4 in July) down to its slowest pace since September 2021. However, reports of energy and salary cost inflation remained close to record highs.
In addition, supply constraints continued to ease in August with companies reporting supplier shipping delays falling to their lowest level since October 2020.
Meanwhile, manufacturing firms reported that input shortages dropped to their lowest level since November 2020, providing some relief to businesses.
Jeavon Lolay, head of economics at Lloyds Bank Corporate and Institutional Banking, said: “While the government’s energy support package represents a crucial intervention for households and businesses, it is too early to tell whether this will turn the overall trend of the economy.
“However, it should have a marked impact on UK inflation, with the likely peak later this year now estimated to be closer to the current rate of 10%, rather than the much higher double-digit rates anticipated for next year.
“Looking ahead, firms will be paying close attention to the new Chancellor’s plans for emergency support during the energy price crisis and his policies to boost growth.”
Scott Barton, managing director at Lloyds Bank Corporate and Institutional Banking, added: “The cost of doing business remains extremely high, and firms continue to face into a significant period of uncertainty.
“Reduced supply chain pressures is positive news for businesses, helping to alleviate one of the challenges they face and should allow them to free up some working capital that they may have otherwise tied up in stock.
“Healthy cashflow and strong working capital management will be key – ensuring that management teams can deploy funds where needed, when required, to capitalise on new opportunities and continue to trade through slower periods.”
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