Private sector returns to growth at start of 2024

By Tim Aldred

12 Feb 2024

Natwest

The North West private sector began the new year with growth in terms of both output and jobs.

The latest NatWest Regional PMI Business Activity Index scored 51.5 for January, on a seasonally adjusted scale where a score above 50 represents growth. December scored 48.8, the sixth month of contraction.

After falling in each of the previous eight months, new business volumes across the North West private sector returned to growth in January. The modest rise in new work was driven largely by the service sector and attributed by surveyed firms to greater enquiries and an improved mood among customers. 

Nevertheless, ticking up from a 12-month low in December, the Future Activity Index was still below its long-run average and signalled a lower degree of optimism than seen across the UK as a whole. Local firms reported hopes of a pick-up in market demand and successful product launches, but they also voiced concerns about competitive pressures and squeezed customer budgets.

There was a solid rise in workforce numbers across the North West private sector in January, thereby reversing the modest back-to-back declines seen at the end of last year. The increase in employment was the most marked since September 2022 and the third-fastest among the 12 monitored regions. Underlying data indicated that job creation was centred on the service sector, where firms reported planning for future growth.

Firms in the North West reported a further reduction in outstanding business (i.e. orders awaiting completion) in January, in line with the trend seen in every month since June 2022. The decline continued to be led by the manufacturing sector, underlying data showed. Although still solid, the rate of depletion slowed for the fifth month running to the weakest since last June.

The rate of increase in business cost slowed slightly in January. The seasonally adjusted Input Prices Index ticked down from December's five-month high and registered broadly in line with its historical series average. Where operating expenses rose during the month, surveyed firms often remarked on salary increases. Cost pressures in the region remained among the lowest nationally, with only Northern Ireland recording a comparatively slower rise.

Matching the trend in input costs, average prices charged by businesses in the North West rose at a slower rate in January. Output price inflation retreated from December's five-month high to its lowest since last September. It also remained firmly below the UK-wide rate, which likewise eased at the beginning of the year.

Malcolm Buchanan, chair of NatWest North Regional Board, commented: "The first batch of PMI data for 2024 indicated a positive start to the year for companies in the North West. Business activity picked up in January amid signs of improving demand, with the increase in workloads also benefitting the region’s labour market. Employment rose notably and at one of the quickest rates seen nationally in January.

"That said, it is important to acknowledge that the upturn in activity follows a downturn throughout most of the second half of last year, and that business expectations towards growth prospects for the next 12 months remain subdued by historical standards."

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