Buoyant demand fosters further growth of new business and output - report

West Midlands companies benefited from positive demand trends in May and responded to this by creating more jobs and lifting business activity, NatWest PMI^� data showed.

Inflation data also displayed an encouraging picture, as the weakest increase in input costs for two-and-a-half years restricted the rate at which output charges were raised.

The headline 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 - was up from 52.8 in April to 54.2, signalling the strongest expansion since April 2022.

Survey participants linked the upturn to better sales, capacity growth, favourable weather and fruitful publicity. Moreover, local output increased at the third-best rate seen out of the 12 monitored UK regions and nations.

May data highlighted a fourth successive rise in new business placed with private sector companies in the West Midlands. Moreover, the rate of expansion was little-changed from April's marked pace.

Monitored firms linked the latest upturn to positive demand trends, new client wins and better weather conditions. Regionally, the West Midlands came third in the rankings for sales. Only London and the South East saw stronger increases.

Although the latest results showed another substantial increase in input costs facing private sector companies in the West Midlands, the rate of inflation eased to the weakest since November 2020.

Survey participants noted higher prices for key inputs and wage pressures, but also reported lower fees for items such as packaging and plastics. The local increase in cost burdens was the second-slowest regionally, ahead only of Northern Ireland.

With cost pressures subsiding, there was a softer increase in prices charged for goods and services across the West Midlands.

West Midlands companies remained confident that output would be higher in 12 months' time compared to present levels.

Moreover, the respective index climbed to a 16-month high and signalled a robust degree of optimism. Poor competitor performance, new client onboarding, advertising, expanded capacities and investment in technology were cited as opportunities to growth prospects. Sentiment locally was the highest seen out of the 12 monitored UK regions and nations.

Amid reports of acquisitions, client growth and a healthy demand environment, West Midlands companies lifted payroll numbers again in May.

Not only did backlogs decrease for the sixth successive month in May, but also to the greatest extent since January.

Rashel Chowdhury (pictured), NatWest Midlands and East Regional Board, commented:

"The PMI results for the West Midlands reveal a highly encouraging economic landscape, characterised by demand resilience, a notable surge in output, employment growth and tempered rates of inflation.

“It's great news for businesses and workers alike, as it indicates a thriving and dynamic environment in which the creation of new roles fosters economic stability and enhances the standard of living for local families.

“While inflation still needs attention, the fact that it slowed down stilled a greater sense of optimism among firms and paint a promising picture for near-term growth prospects."