Firms signal renewed rise in new business at start of 2022 - report

Private sector output in the West Midlands continued to expand at the start of the year, according to the NatWest PMI.

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 - rose from 50.7 in December to 51.9 in January, pointing to a quicker rate of growth that was nonetheless moderate and considerably slower than those recorded in 2021.

Companies linked the upturn to new client wins, a recovery from the recent wave of Covid-19 and improved demand conditions.

January data pointed to a renewed increase in new business received by private sector companies in the West Midlands, following a stagnation at the end of 2021.

Companies linked the upturn to the diminished impact of rising Covid-19 cases on demand and clients bringing purchases forward to avoid price hikes.

However, some firms suggested that the pandemic continued to hamper sales.

Indeed, the rate of expansion was moderate and much slower than those registered in 2021.

West Midlands companies signalled an increase in overall cost burdens at the start of the year.

After receding in December, the rate of inflation quickened in January and was beaten only by that recorded in November 2021 (data became available in January 1997).

Panellists reported higher food, fuel, raw material, staff, transportation and utility costs. Local firms saw a stronger upturn in expenses than that registered at the national level.

For the fifth month running, average prices charged by goods producers and service providers in the West Midlands rose at a record pace during January (since November 1999).

Approximately 43 per cent of panellists hiked their fees, while 1 per cent reduced them.

Anecdotal evidence indicated that ongoing increases in operating expenses continued to be transferred to consumers.

West Midlands companies were strongly optimistic that output would increase over the course of the coming 12 months.

Moreover, the overall level of confidence rose to its highest since last May and was much stronger than the long-run series average.

Panellists indicated that the easing of Covid-19 restrictions and the reduction in the self-isolation period should support demand and business activity.

Marketing efforts, new product launches and expansion into new markets were also among the reasons cited for upbeat projections in January.

Private sector employment in the West Midlands continued to increase in January, taking the current stretch of expansion to 11 months.

Having quickened to the strongest since last October, the rate of growth was marked and above its long-run average. Panellists that reported higher staffing levels mentioned improved demand conditions and efforts to narrow resource shortages.

The West Midlands recorded a slightly slower upturn in jobs than that seen at the UK level for the third month running.

Outstanding business volumes at companies operating in the West Midlands private sector rose further in January.

The latest increase was the eleventh in as many months, albeit slight and the second-slowest over this period. Where backlog accumulation was reported, survey members mentioned staff and raw material shortages.

The expansion in unfinished work in the West Midlands was the slowest of the 11 regions that posted growth (a contraction was seen in the North East).

John Maude (pictured), NatWest Midlands and East regional board, said: “It is encouraging to see that the latest wave of Covid-19 had a very mild and short-term impact on the economy of the West Midlands.

“Companies indicated that demand had already picked up, following the relaxation of restrictions, and businesses themselves were strongly upbeat towards growth prospects.

“In particular, firms welcomed the reduction in the self-isolation period, which they hope will help ease staff constraints and enable them to take on more work.

“On a less positive note, the latest results pointed to a further intensification of inflationary pressures in the region.

“Unsurprisingly, local firms again reported higher food, fuel, raw material, staff, transportation and utility costs. Additional cost burdens were transferred to consumers, with prices charged for goods and services rising at a record rate in January. ”