Confidence among South West firms is the highest it’s been for a year amid rising output, sales and employment, according to a new Natwest report.
The bank’s South 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 - saw its first increase in activity across the region for seven months.
Bosses told researchers the upturn in new business, which also saw the first expansion of staffing levels for three months, coincided with strengthened demand from customers.
The survey found that upbeat forecasts were often linked to business expansion plans, investment in new technology, improved marketing and new contract wins. Panel members linked higher levels of work-in-hand, but not yet completed, to increased sales and staff shortages.
Inflationary pressures remained elevated, with companies seeing further marked increases in input costs and output charges. Businesses that took part in the study said expenses had been pushed up by factors such as staff, utilities, food and raw materials. Despite this, Natwest said the pace of increase slipped to a near two-year low.
Input cost inflation also cooled to a 22-month low at the national level, and was broadly in line with that seen in the South West.
Output charges set by South West private sector companies rose again in February, thereby stretching the current sequence of inflation to 26 months. There were widespread reports of firms raising their selling prices as part of efforts to pass on additional expenses to customers.
Paul Edwards, chair of the NatWest South West Regional Board, said the data “painted a positive picture” of the performance from South West firms last month.
Mr Edwards said: “The turnaround in conditions was reportedly due to improved customer demand and stronger confidence around the outlook, which led clients to push on with projects and place more orders.
“Notably, business confidence around the year- ahead improved to its highest since February 2022 as firms anticipate a sustained recovery in economic activity and increased investment. However, strong cost pressures persisted, driven in part by rising staff and energy costs. Although input price inflation slipped to a 22-month low, it remained much higher than the historical average, and contributed to a further marked increase in selling prices.”
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