• Swindon & Wiltshire Economy
• Monday April 15 2024
• Author Name: Peter Davison

South West economic output bounced back in March – Natwest

South West economic output bounced back in March, according to the NatWest South West PMI Business Activity Index.

And the report recorded the fastest increase in new work since May 2023.

However, business confidence slipped to a three-month low according to the index, which measures the month-on-month change in the combined output of the region’s manufacturing and service sectors.

The index climbed back above the 50.0 no-change mark in March, rising to 51.2 from 49.3 in February, to signal a marginal expansion in output at the end of the first quarter.

The uplift followed an additional boost to new order inflows, which was modest but the strongest in nearly a year.

The volume of new business at companies in the South West rose in March, continuing the run of growth that began last December.

Where an uptick in new work was noted, firms commented on improving client confidence, new bookings and greater export orders.

Although moderate, the rate of expansion accelerated slightly to a ten-month high. It was also more closely aligned with the UK average.

South West businesses gave an upbeat assessment of the 12-month outlook at the end of the first quarter.

Despite ticking down to a three-month low, the level of confidence was still much higher than the series long-run trend, with over half (52 per cent) of respondents expecting growth.

Survey comments often cited hopes of an economic recovery, with manufacturers showing greater optimism than services companies.

The number of people employed at firms in the South West dropped slightly in March, as indicated by the seasonally adjusted Employment Index returning to sub-50.0 territory.

This followed the first expansion in six months during February. Lower staff numbers were often linked to the non-replacements of leavers.

Sector data indicated that the fall in employment was concentrated on the goods segment, whereas service providers saw an uptick in staffing.

South West companies depleted their levels of unfinished business for the thirteenth consecutive month in March.

However, the rate of reduction softened from the previous survey period and was only modest. Survey panellists noted that rising new orders had squeezed efforts to reduce backlogs.

Businesses in the South West continued to face higher input costs at the end of the first quarter. The pace of inflation was marked, but eased slightly from February’s five-month high and was one of the softest seen in the past three years.

Reports commonly linked higher costs to wage rises, while some firms cited upticks in material prices.

While input cost pressures remained much stronger in the service category, the latest data signalled a renewed increase in manufacturing costs.

The degree to which South West firms raised their output prices was unchanged in March, with the data signalling a sharp increase in charges overall.

But the pace of inflation was still one of the slowest recorded since early-2021, and softer than the national trend. Businesses tended to raise their charges in order to pass higher costs on to customers.

‘South West region’s economy is on an upwards path’

Paul Edwards, chairman of the NatWest South West Regional Board, said: “A further improvement in new work volumes meant that February’s dip in business activity was self-contained, as March survey data pointed to a modest upturn in output.

“The expansion was mild when compared with the UK average, but nonetheless offered consolation that the South West region’s economy is on an upwards path.

“Indeed, signs of a local and UK economic recovery continued to support business confidence, rounding out a first quarter where sentiment has trended higher than during much of the last two years.

“Although price pressures were cooler than in recent years, they remained elevated in March, with input costs rising sharply amid higher wages.

“Subsequently, firms often decided to keep vacant positions unfilled despite rising new work intakes, leading to a renewed drop in employment.

“The South West’s private sector workforce has contracted six times in the past seven months, which may serve to inhibit growth if demand continues to strengthen.”

Latest: South West sees fastest rise in new business in two years – Natwest