West Midlands see strongest upturn in business activity in eight months - report

The first release of PMI data for 2024 showed sustained growth of new business placed with West Midlands firms, and the strongest upturn in output for eight months.

Job levels were stable, however, as cost considerations dampened recruitment. Not only did input prices and selling charges increase further, but also to the greatest extents since mid-2023.

The headline NatWest West Midlands PMI 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 – was up from 51.5 in December to 53.1 in January.

The latest reading signalled a solid rate of expansion, and one that was the fastest since May 2023. Growth was reportedly fuelled by rising intakes of new orders and demand resilience. Out of the 12 regions and nations monitored by the survey, only London noted a sharper upturn than that seen locally.

January data highlighted a further uptick in new business placed with West Midlands companies, taking the current run of growth to one year. Although moderate, the pace of expansion was the joint-quickest in seven months (equal to December).

Marketing initiatives, networking events and demand resilience fuelled sales, according to panellists. The local trend for new orders was the third-best of the 12 monitored UK regions and nations.

January data pointed to another increase in the expenses of companies operating in the West Midlands.

Moreover, having quickened to a six-month high, the rate of inflation was sharp. The respective seasonally adjusted index was above its long-run average, but remained below the readings seen from December 2020 and July 2023. Panellists indicated that unfavourable exchange rate movements, labour, transportation and input shortages were the key sources of cost pressures.

Amid reports of the pass-through of rising input, labour and transportation costs to clients, prices charges for West Midlands goods and services increased further at the start of the year.

The rate of inflation was sharp and the strongest in seven months, but remained below those seen between early-2021 and mid-2023. Only Scotland and London registered faster increases in selling prices than that noted locally.

The seasonally adjusted Employment Index posted at the 50.0 threshold in January, thereby signalling stable job numbers across the West Midlands following a brief decline in December. Firms that took on additional workers mentioned new business growth. Those that reported a reduction cited long-term sickness absence, retirement and cost considerations.

For the fourteenth straight month, private sector companies in the West Midlands signalled a fall in pending workloads during January. According to survey members, productivity enhancements and only modest expansions in new business volumes supported the clearing of backlogs. The overall rate of depletion was modest, however, and the slowest since April 2023. The West Midlands was one of 11 UK areas to record a reduction in unfinished business, with London the sole exception.

Private sector firms based in the West Midlands became more upbeat towards the outlook for output. The overall level of positive sentiment rose to a four-month high and was above its long-run average. Underpinning optimism were forecasts of demand growth, new project onboarding and publicity. The West Midlands topped the regional rankings for business confidence.

Rashel Chowdhury (pictured), from NatWest Midlands and East Regional Board, said: "There were good and somewhat worrying trends in the latest batch of PMI data for the West Midlands. New business expanded further as marketing efforts continued to bear fruit whilst demand for local goods and services remained resilient.

“While the uptick in sales spurred output growth, it failed to generate jobs locally as most businesses kept a lid on costs.

“Both price indices rose further in January, signalling the strongest rates of inflation since mid-2023 and raising some concerns surrounding the path for wider inflation in the coming months."