Output in the Welsh private sector continued to expand in April, but at a slower rate.
The NatWest Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the manufacturing and service sectors – registered 51.1 in April, down slightly from 52 in March. Anything below 50 denotes contraction,
Where an increase in activity was noted, companies said this was due to a further increase in new orders. The rise in business activity was the third in as many months, but was the slowest of the 12 monitored UK areas.
Welsh private sector firms recorded a second successive monthly expansion in new orders in April. Greater new business inflows were linked to higher demand and increased customer activity. That said, the rate of growth slowed from March’s 10-month high to only a modest pace. The rate of increase was also weaker than the UK average. Welsh firms were upbeat on the outlook for output over the coming 12 months. Confidence levels were the strongest since November 2021 - exceeding the rate for the UK as a whole.
They also reported a fourth consecutive monthly decline in employment. Job shedding was attributed to the non-replacement of voluntary leavers amid cost-cutting efforts.
Wales was the only monitored area to register lower employment, with the UK average signalling a solid upturn in staffing numbers.
April’s data indicated a further drop in the level of outstanding business at Welsh private sector firms. The decrease was steep overall, and quickened to the fastest since July 2020. The fall in incomplete business was linked to sufficient capacity to work through new orders in a timely manner.
The decline in backlogs of work contrasted with the UK average which signalled unchanged levels of unfinished business. Welsh businesses registered the sharpest decrease of the 12 monitored UK areas.
Kevin Morgan, member of the NatWest board in Wales, said:“Welsh firms signalled a drop off in growth momentum during April, as expansions in output and new orders softened. Companies were challenged further as inflationary pressures regathered speed, with selling prices rising at the fastest rate for three months. Hikes in supplier and end-customer prices are likely to exacerbate obstacles to growth as client spending may be squeezed further.
“Meanwhile, jobs continued to be cut as voluntary leavers were not replaced in an effort to reduce outgoings amid reports of strong hikes in wages.
“Firms appeared to absorb the fall in employment with little knock-on impact on capacity, as backlogs dropped again, and at a faster pace. Nevertheless, companies were strongly upbeat in their expectations for the coming year. Optimism improved to the greatest level since late-2021.”
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