West Midlands output shows marginal upturn - report

The region 's manufacturing and service sectors experienced a marginal upturn during February, according to NatWest West Midlands PMI^� Business Activity Index.

The index, which measures the month-on-month change in the combined output of the region 's manufacturing and service sectors, returned to expansion territory after a sharp contraction at the start of the year.

Rising from 41.5 to 51.1, the latest reading was consistent with only a slight recovery in activity following the lockdown-induced downturn in January.

Where growth was reported, it was attributed to the clearing of backlogs, projects in the pipeline and reduced uncertainty.

After contracting sharply at the start of 2021, new work intakes at West Midlands companies fell only marginally in February.

This was indicated by the respective seasonally adjusted index moving closer to the critical 50.0 threshold.

Some firms suggested that the national lockdown restricted sales at their units, but others indicated that a reduction in uncertainty, restocking efforts among clients and online shopping underpinned demand growth.

West Midlands companies remained optimistic towards the year-ahead outlook for business activity.

Almost 66 per cent of survey participants foresee growth, with confidence pinned on hopes that the coronavirus disease 2019 vaccination programme will curb the spread of infections, leading to the lifting of restrictions and a recovery in demand.

The overall level of positive sentiment remained elevated, despite falling slightly from January's four-year high.

Employment in the West Midlands decreased in February, stretching the current sequence of contraction to 13 months.

Private sector firms in the West Midlands signalled a second successive monthly drop in unfinished work halfway through the opening quarter of 2021.

The rate of depletion was moderate, despite quickening from January, and much softer than the UK average. Local companies reported increased efforts to clear pending work.

Amid reports of material shortages as well as higher prices for freight, metals, packaging and plastics, average input costs at West Midlands companies increased in February.

The rate of inflation was sharp and the second-fastest in over two-and-a-half years (behind December 2020).

Moreover, the rise was the eighth in consecutive months.

February data highlighted a ninth successive monthly rise in prices charged for goods and services across the West Midlands.

The rate of inflation remained marked, despite easing slightly from January 's near two-and-a-half year high.

Those survey members that hiked their fees indicated that additional cost burdens had been shared with clients.

John Maude (pictured), NatWest Midlands and East regional board, said: “Despite the ongoing national lockdown, West Midlands companies managed to lift business activity in February as some diverted resources towards the completion of backlogs of work.

“This is welcome news, particularly after January's marked fall in output and given that contractions had been sustained across many other UK regions.

"The Covid-19 vaccination programme has lifted spirits, with West Midlands firms strongly optimistic towards growth prospects.

“The upbeat sentiment failed to translate into job creation, but employment declined only slightly in February.

"With new orders nearing stabilisation and a roadmap for the lifting of lockdown restrictions now laid out, a recovery in economic conditions is anticipated in the year ahead. ”