Near-record rise in region 's output amid strong sales growth - report

Private sector activity in the West Midlands enjoyed a strong increase throughout June, according to NatWest 's latest PMI^� Business Activity Index.

The seasonally-adjusted index that measures the month-on-month change in the combined output of the region 's manufacturing and service sectors highlighted the third-quickest rate of expansion since the series started in January 1997.

Local companies linked growth to a pick-up in sales, strengthening demand conditions and businesses reopening.

There was a fourth successive monthly increase in new orders at private sector firms in June.

Despite easing to a three-month low, the rate of growth remained sharp and well above its long-run average.

According to panel members, sales rose in line with looser Covid-19 restrictions, better demand conditions and improved market confidence.

Private sector companies in the West Midlands recorded a fourth consecutive monthly rise in employment during June.

Moreover, the pace of increase was sharp and the strongest since the series started in January 1997.

The upturn was associated with a pick-up in new business and associated capacity expansion efforts.

The rise in payroll numbers was widespread across the manufacturing and service categories.

The West Midlands registered the quickest upturn in jobs of all 12 monitored regions.

Amid expectations of a reduction in Covid-19 cases, vaccination progress globally and that the final lifting of restrictions across the UK will take place, West Midlands companies were optimistic that output would rise in the year ahead.

The overall level of positive sentiment fell to a four-month low, but remained elevated by historical standards.

Some companies were worried about cautious investment decisions and travel restrictions.

Outstanding business volumes at private sector firms in the West Midlands continued to rise in June, stretching the current sequence of growth to four months.

Moreover, the rate of backlog accumulation was sharp and the third-fastest in the series history (since November 1999).

Monitored companies indicated that capacities came under pressure due to substantial increases in new work, raw material shortages and lengthening supplier delivery times.

The West Midlands was placed third in the regional rankings for growth of backlogs, behind Wales and the North West.

Average cost burdens at West Midlands companies rose in June, as has been the case on a monthly basis for a year.

Having quickened from May, the rate of inflation was steep and the third-fastest on record.

Panellists linked the latest increase to limited freight supply and global shortages of raw materials.

Manufacturing firms observed a sharper rise in input costs than their services counterparts.

At the regional level, only Northern Ireland recorded a stronger rate of input cost inflation than the West Midlands.

Demand conditions remained conducive to price increases, with selling charges rising for the thirteenth month running in June.

Furthermore, the rate of inflation was sharp and the fastest since July 2008.

Survey participants commonly stated that higher charges stemmed from rising cost burdens.

In line with the trend for input costs, the faster rate of inflation for charges was registered in the manufacturing industry.

John Maude (pictured), NatWest Midlands and East Regional Board, said: “The economic recovery of the West Midlands extended to June, as the easing of Covid-19 restrictions earlier in the year continued to boost demand for goods and services. Notably, business activity again expanded at a near-record pace.

“The strength of the rebound caused capacity pressures among local firms, who responded to rising backlogs by hiring additional staff at an unprecedented monthly rate. The West Midlands was the top performer on a regional basis for employment growth.

“PMI data revealed that local firms retained pricing power in July, with many businesses able to share additional cost burdens with their clients via increases in selling prices. Rates of inflation of both input costs and output charges were the third-highest in the respective series histories. ”