Economic output has fallen in the East Midlands for the first time in 16 months according to a new NatWest business survey.
The monthly NatWest East Midlands Business Activity Index said orders were down last month and business confidence was at its lowest since the first lockdown as costs continue to rise.
The region was one of three monitored by NatWest to post a decline in output, alongside the East of England and Northern Ireland.
The bank survey suggested new orders were dropping and that a “lack of confidence among customers and rapid price increases were reportedly behind the decline”.
It also suggested that the drop in new work was happening in the service sector, with new manufacturing orders still stable.
At the same time businesses continue to recruit – although there was a warning that might not last.
A spokeswoman said: “Concerns around a slowdown in the wider economy and the impact of cost of living increases on demand led to a further downgrading of confidence in the East Midlands private sector.
“Sentiment dropped for the fifth month running and was the lowest since the spell during the first wave of the Covid-19 pandemic.
“Those firms that projected an increase in output over the coming year hoped for demand improvements.
“Although output and new orders decreased in June, East Midlands companies continued to increase their staffing levels.
“Moreover, the rate of job creation was sharp and the fastest since March. The rise in the region was broadly in line with that seen across the UK as a whole.
“Some respondents indicated that they were still trying to rebuild workforces and fill vacant positions following the pandemic.”
John Maude, who sits on the NatWest Midlands & East Regional Board, said: “The latest East Midlands PMI data paint a worrying picture of the region's near-term economic outlook, with output joining new orders in contraction at the end of the second quarter.
“Business confidence is draining away, falling for the fifth month running to a level above only the spell seen during the initial wave of the Covid-19 pandemic.
“The potential for the cost of living crisis to cause an economic downturn was at the forefront of firms' minds.
"One bright spot from the latest survey was a sharp and accelerated rise in employment as companies continue to play catch-up when it comes to workforce numbers following the pandemic. “It remains to be seen whether this positive labour market picture will continue should the declines in demand be sustained in the months ahead."
