• Swindon & Wiltshire Economy
• Monday March 11 2024
• Author Name: Peter Davison

South West business activity falls slightly in February – Natwest

Business activity in the South West fell slightly in February, according to the NatWest South West PMI Business Activity Index.

The seasonally-adjusted index, which measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – slipped from 52.0 at the start of 2024 to below the neutral 50.0 level at 49.3 in February.

This signalled a reduction in business activity across the region for the first time in three months

While the decline was marginal, the report’s authors noted that contrasted with a solid rise in output at the UK level.

However, the seasonally-adjusted New Business Index posted above the neutral 50.0 level to signal an increase in new work placed with South West companies for the third month running in February.

The rate of expansion was unchanged from January and only modest. The upturn was also slightly softer than the UK-wide trend. Where higher sales were reported, this was generally linked to firmer customer demand and improved marketing. However, some companies noted that weaker economic conditions and strong inflation had weighed on new orders.

Firms based in the South West expressed slightly stronger confidence towards the year-ahead outlook for output in February. Moreover, the degree of optimism was the highest seen since the start of 2022.

Stronger economic conditions, greater investment and new product lines were all anticipated to boost business activity over the next 12 months. However, sentiment in the region was slightly softer than the average seen across the UK as a whole.

After falling in each of the prior five months, employment at South West private sector businesses increased during February. That said, the rate of job creation was only marginal and broadly in line with that seen at the national level.

Companies that added to their payrolls often attributed this to efforts to increase capacity and fill outstanding vacancies.

Efforts to increase capacity and relatively subdued inflows of new orders supported a further drop in unfinished business at South West firms during February.

Though modest, the rate of backlog depletion was the quickest recorded in three months and similar to the UK-wide average. Outstanding workloads in the region have now declined in each month for the past year.

As has been the case since June 2020, average cost burdens faced by South West companies increased during February.

The rate of inflation quickened to a five-month high and was sharp in the context of historical data. Input costs rose at a near-identical pace across the UK as a whole.

Anecdotal evidence suggested that a range of factors had pushed up expenses midway through the opening quarter of the year, including labour, energy and raw materials.

Adjusted for seasonal factors, the Prices Charged Index signalled that South West private sector firms raised their selling prices for the thirty-eighth month in a row during February.

Whilst sharp and above the series average, the rate of increase quickened only slightly from January’s near three-year low. The hike in output charges was also softer than that seen at the national level.

Companies that raised their selling prices generally linked this to the pass-through of higher expenses to clients.

“The latest PMI survey hinted that the recovery in business conditions across the South West took a slight step back in February, as relatively subdued demand conditions led to a marginal fall in activity,” said Paul Edwards, chairman of the NatWest South West Regional Board.

“Nevertheless, companies were keen to look through the current challenging market conditions and were more upbeat about their prospects for the year ahead.

“This optimism translated into the first uptick in staffing levels for six months, as companies anticipated stronger economic conditions and rising customer spending to support growth in the months ahead.

“However, the latest survey also indicated that both input costs and selling prices rose at faster rates than in January, suggesting that we are yet to see a sustained softening of inflationary pressures.”

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