The North West private sector saw modest growth in business activity during August compared with a downturn across the UK as a whole, according to the latest Regional PMI data from NatWest.
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 – came in at 51.8 last month.
This represented a slight improvement from July's 51.1 and took it further above the 50 threshold that separates growth from contraction.
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Of the 12 regions monitored, just two others (London and Yorkshire & Humber) recorded an increase business activity during the month.
NatWest added that the pace of growth remained muted compared to earlier in the year, however, amid signs that high inflation and the uncertain economic outlook were weighing on demand. Business confidence in the region declined, whilst the pace of job creation slowed to an 18-month low.
After decreasing in July – albeit marginally – for the first time in 17 months, inflows of new work across the North West private sector broadly stagnated during August. The result was in line with the UK-wide trend. The bank also said that anecdotal evidence pointed to increased difficulty securing new work due to cost of living pressures and a general economic slowdown.
August data showed a drop in confidence among firms in the North West towards the year-ahead outlook for activity. After recovering in July, expectations moved back closer to June's 25-month low and were below the historical series average (since 2012). Concerns about weaker demand conditions and a potential contraction in the economy weighed on companies' growth forecasts.
Employment levels continued to rise across the North West private sector during August, albeit with waning momentum. Easing for the fourth time in the past five months, the rate of job creation was in fact the slowest seen since the current upturn in workforce numbers began in March 2021 and below the UK average. Underling data indicated that hiring was centred on the region's service sector, with local factory employment levels showing little-change.
Latest data showed further evidence of easing capacity pressures across the North West's private sector, with August seeing another notable decline in backlogs of work (i.e. orders received but not yet completed) at firms. The decline was the fourth in the past five months and broad-based by sector, albeit slightly less than marked in July.
Business expenditure continued to rise sharply during August, with surveyed firms commenting on increases in energy bills, wages, food prices and charges from suppliers. That said, whilst remaining well above its historical series average, the overall rate of input price inflation retreated further from May's record high to the lowest since July 2021.
Soaring costs led many businesses across the North West to raise prices charged for goods and services during August. The rate of inflation even ticked up from July's 11-month low and, although still down on the record highs seen earlier in the year, was among the quickest in the series history.
Malcolm Buchanan, chair of North Regional Board, said: "In the context of a slowdown in the wider economy, growth of business activity in North West, albeit only modest, is a positive result for the region.
"However, there are a number of warnings signs in the latest PMI survey, which point to an increasingly difficult operating environment for local firms.
"Companies have now gone two months without any growth in new business and are quickly eating into their backlogs of work. Indeed, firms are less optimistic about the outlook and have slowed the rate job creation accordingly.
"With businesses spending more on energy and inputs generally, they have been left with little choice but to raise prices and could well take an even more cautious approach to hiring going forward."
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