The headline NatWest Yorkshire & Humber 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 little-changed in January, falling fractionally from 48.7 in December to 48.6.
Overall, this signalled a fourth successive monthly reduction in private sector business activity, although the pace of decline was once again marginal, suggesting the downturn in Yorkshire & Humber’s private sector has been shallow thus far.
The level of incoming new work placed with private sector companies in Yorkshire & Humber fell at the start of the year. Economic weakness reportedly contributed to the slump in demand. That said, the decline was moderate and the weakest seen over the current four-month sequence of contraction.
The Future Activity Index rose to an eight-month high during January, posting further above the 50.0 mark to signal a strengthening of optimism among Yorkshire & Humber firms. In addition, the region posted the second-strongest level of confidence when compared against the other eleven monitored parts of the UK.
According to survey respondents, new product launches and the acquisition of new customers were cited as reasons to be upbeat towards the 12-month outlook.
Following a marginal decline at the end of 2022, the latest survey data highlighted a return to growth in private sector staffing levels across Yorkshire & Humber. Where an increase in jobs was reported, this was linked to expansion efforts.
The Yorkshire & Humber trend contrasted with that seen for the UK as a whole, which showed stagnant employment levels in January. Only Northern Ireland and the West Midlands posted faster jobs growth than Yorkshire & Humber.
The seasonally adjusted Outstanding Business Index posted below the 50.0 no-change mark in January for a second month in a row, signalling a sustained reduction in backlogs of work at private sector firms in Yorkshire & Humber. The decrease was moderate and slightly softer than seen previously.
Where a reduction in capacity pressures was reported, this was often linked with weak demand.
Private sector companies in Yorkshire & Humber continued to face intense cost pressures in January, with input prices rising sharply and at a pace that remained well above its long-term average. Increases in costs were primarily linked with greater salary and energy expenses, although some firms remarked on supplier price hikes. However, the rate of inflation eased to a 21-month low.
Prices charged for goods and services provided by private sector companies in Yorkshire & Humber rose sharply in January. The rate of increase edged up slightly and was the strongest in three months. According to panellists, fees were lifted in line with increases in costs.
Malcolm Buchanan, chair of NatWest North Regional Board, said: “Yorkshire & Humber business activity continued to fall in January, extending the region’s contraction that began last October. The region’s economy is being pulled lower by challenging demand conditions, with firms commenting on generally subdued order intakes as clients retrench.
“That said, overall activity levels have fallen only marginally in each month of the current downturn, despite the survey data showing stronger declines in new order intakes over the same period. Backlogs of work have helped bridge the gap, with firms working through their incomplete business.
“Nevertheless, there are encouraging signs. An improvement in business confidence was accompanied by a return to employment growth. Meanwhile, easing cost pressures adds to evidence that inflation may have peaked.”
