New business growth grinds to a halt as inflation climbs - NatWest

There has been softer increase in business activity across the West Midlands as demand was hampered by elevated price pressures, according to the NatWest PMI^�.

Falling from 59.1 in March to 54.5 in April, 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 - indicated the slowest rate of growth in three months.

Where output rose, companies mentioned new contract wins, expanded capacities and the catching up of projects that had been delayed due to Covid-19.

The upturn was reportedly curbed by subdued demand conditions, amid acute inflationary pressures and concerns around the cost of living.

Companies operating in the West Midlands private sector economy registered a slower increase in sales during April than other UK regions, and one that was only fractional.

For the fourth successive month, the rate of input cost inflation across the West Midlands private sector quickened in April. The latest upturn was marked and the second-highest since the series started in January 1997.

In line with ongoing increases in input costs, private sector firms in the West Midlands lifted their selling prices further at the start of the second quarter. Moreover, the overall rate of charge inflation was sharp and the highest since the series started in November 1999.

Despite remaining positive, the level of sentiment among West Midlands firms fell to a 17-month low in April and confidence weakened among both manufacturers and service providers.

Some companies expect new product launches, marketing efforts and expansion plans to support output over the course of the coming year. However, others were worried that inflationary pressures and energy price volatility would curb demand and business activity.

April data pointed to a marked and accelerated expansion in private sector jobs in the West Midlands, following a substantial slowdown in growth during March.

Those companies that took on additional workers indicated that retirees and voluntary leavers had been replaced.

Yet, local jobs increased at a slower pace than that seen at the UK level, as has been the case in each month since last November.

Capacity pressures among West Midlands companies also eased in April, as signalled by the seasonally adjusted Outstanding Business Index posting a lower reading than in March.

John Maude (pictured), NatWest Midlands and East Regional Board, said: “The cost-of-living crisis and soaring bills started to have a negative impact on the West Midlands private sector economy, as consumers tighten their budgets to be able to afford essentials.

“Firms signalled broadly stagnant levels of new work intakes and were less optimistic towards the outlook. Regarding sales, only the North East posted a worse performance than the West Midlands out of the 12 UK regions.

"With input costs increasing at a near-record pace in April, the latest results showed an unprecedented upturn in selling prices in the West Midlands� a factor that is likely to restrict local sales further in the coming months. ”