North West business activity levels continue to rise

By Tim Aldred

12 Jun 2023

Malcolm Buchanan Natwest

Levels of business activity across the North West have risen for the fourth consecutive month, although at a slower rate than before.

The North West PMI Business Activity Index assigns a seasonally adjusted score out of 100, where 50.0 represents an even level of activity.

For May, the North West registered 52.3. While good news, the figure is below last month's 53.5, meaning growth has eased, and it is below the national average of 54.0.

Malcolm Buchanan of NatWest explained: "Businesses operating across the North West reported a decrease in inflows of new work for the first time in four months in May. Although only marginal, the decrease in new business contrasted with solid growth across the UK as a whole. Among the local businesses that recorded a decrease in new work, there were reports of cost of living pressures and uncertainty amongst customers. 

"On the price front, firms raised charges for goods and services at the slowest rate since February 2021, though the pace of inflation was still historically high amid the pass-through of growing salary costs.

"In line with the trend seen across most UK regions and nations, the North West saw a drop in business confidence in May. Although still firmly in positive territory, with far more firms anticipating a rise in activity in the year ahead than those predicting a decline, expectations ticked down to the lowest level in 2023 so far and moved slightly below the long-run average. Interest rate rises were a factor weighing on sentiment, anecdotal evidence showed.    

"Latest data showed a further rise in employment across the North West private sector in May, maintaining a sequence of uninterrupted workforce growth that stretches back to March 2021. The pace of job creation eased slightly since April, but it was nevertheless broadly in line with both the year-to-date average and the national rate.  

"Underlying data showed that hiring activity was centred on the local services sector, with manufacturing payroll numbers declining.     

"The amount of outstanding business (i.e. work awaiting completion) at firms in the North West fell in May, the twelfth month in a row in which this has been the case. Owing to a combination of reduced inflows of new work and increased staffing capacity, the rate of backlog depletion accelerated to the quickest since December last year. It was also one of the quickest among the 12 monitored regions, surpassed only by those recorded in Wales and Yorkshire & Humber. 

"After slowing continuously for almost a year, down to a 27-month low in April, the rate of input price inflation faced by North West businesses ticked up in May. Where an increase in operating expenses was recorded, firms often cited the influence of higher salaries.

"Service sector costs rose sharply and a much quicker rate than those faced by manufacturers, underlying data for the region showed.

"Whilst firms across the North West continued to raise prices charged for goods and services in line with increasing cost burdens, they did so at the slowest rate since February 2021. The rate of output price inflation – which was the third-lowest nationally – nevertheless remained well above the long-run series average."

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