New orders for products and services in the East Midlands rose at their fastest pace since March 2022, according to a new NatWest report.
The bank’s monthly PMI survey of business managers also found that inflationary pressures eased in June and business confidence was at its strongest in almost a year-and-a-half – despite rising interest rates and ongoing inflationary pressures.
However the East Midlands business leaders also signalled a renewed drop in output – the first in five months – which contrasted with the picture for the UK as a whole, which indicated a solid rise.
East Midlands firms signalled a fifth successive monthly upturn in new orders at the end of the second quarter, which was faster than the UK average.
In fact, the East Midlands recorded one of the steepest rates of growth of the 12 monitored UK regions, with only the West Midlands, London and Scotland registering more robust expansions. The increase in new orders was linked to stronger demand from new and existing customers.
Business confidence also firms improved in June, as the degree of optimism in the outlook for output over the coming year rose to the highest since January 2022. Investment in new products and machinery, alongside hopes of greater economic certainty, sparked stronger output expectations, according to panellists.
Of the 12 monitored UK regions, only the South East and West Midlands registered a higher level of positive sentiment.
The June data indicated a third successive monthly upturn in employment at East Midlands companies, often linked to increased new orders. The rate of job creation slowed to a marginal pace, however, and was softer than the UK average.
The level of backlogs of work at East Midlands firms continued to decline during June, in line with the UK average.
Operating expenses among firms in the East Midlands rose at a further marked pace at the end of the second quarter, put down to higher interest rates, greater supplier prices and rising wage bills. That said, the pace of cost inflation softened again, and was the slowest since the start of 2021.
The rise in cost burdens was driven by the service sector, as manufacturers recorded only a slight uptick in input prices.
Rashel Chowdhury, who sits on the NatWest Midlands and East regional board, said: “East Midlands firms signalled a challenging end to the second quarter as, despite a stronger rise in new business, output returned to contraction territory.
“Companies sometimes noted that current staffing numbers were sufficient to handle incoming new work.
“Although businesses continued to create jobs, the rate of employment growth slowed for the second month running and to only a marginal pace.
“On a more positive note, inflationary pressures softened. Input costs and output charges rose at the slowest rates since January and February 2021, respectively, as some moderations in supplier costs were passed through to customers.
“Nonetheless, wage hikes were a driving factor behind inflation, with the service sector particularly impacted.
“Firms were more upbeat in their expectations for future output, however, as confidence reached the highest for 17 months."
