Business activity increases despite decline in new orders - report

Data from NatWest 's revealed a return to growth of private sector output in the West Midlands throughout June, following a contraction in May.

According to the NatWest PMI - a seasonally-adjusted index - output was up from 49.7 to 51.1 midway through the year.

Survey participants mentioned improved demand from a few clients.

However, the overall rate of expansion was only slight, with growth centred on the service sector.

Anecdotal evidence indicated that price pressures, higher energy costs and subdued demand for a wide range of products continued to restrict the upturn.

New business placed with West Midlands companies fell at the end of the second quarter, ending a five-month sequence of expansion.

Where a decline was reported, survey members indicated that rising interest rates, acute price pressures and future uncertainty restricted demand.

The overall rate of reduction was only slight as growth in the service sector cushioned the drop in manufacturing.

The local decrease in sales contrasted with growth at the national level.

West Midlands companies continued to report greater operating expenses midway through 2022.

Higher energy, food, infrastructure, material and staff costs were cited as the main sources of price pressures, alongside Brexit, material shortages and the war in Ukraine.

The overall rate of inflation eased to a six-month low, but was among the strongest in the series history.

Despite easing to a four-month low in June, the rate of charge inflation in the West Midlands private sector remained well above its long-run average and surpassed those seen prior March (the series started in late-1999).

Among the 35 per cent of companies that lifted their fees, there were mentions of the pass-through of rising costs burdens to clients.

The Future Activity Index rose from May's 19-month low, to signal a slightly stronger degree of optimism among private sector companies in the West Midlands in June.

Upbeat growth projections stemmed from predictions of a pick-up in demand, improved tourism, new product releases, expanded capacities and quotations pending approval.

John Maude (pictured), NatWest Midlands and East regional board, said: “The June results clearly show the damaging impact of price pressures on demand, with West Midlands firms noting the first decline in new orders since February 2021 as additional expenses continued to be transferred to customers while earnings growth is failing to keep up pace with price increases.

“The retreat in inflation provides little comfort for squeezed budgets, considering that both input costs and output charges again rose at near-record rates.

“There were some positive takeaways from the latest data, as a mild recovery in business optimism supported local job creation and a slight upturn in output. ”