Sunday, March 3, 2024

Yorkshire & Humber business activity returns to growth for first time since last July

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 – moved into expansion territory for the first time in six months during January.

Up to 51.2, the headline index rose from December’s neutral reading of 50.0 to signal a modest improvement in private sector business activity across Yorkshire & Humber.

Nevertheless, Yorkshire & Humber firms performed weaker than the national benchmark, with the comparable index for the UK as a whole (52.9) indicative of a solid upturn that was the fastest for eight months.

Private sector companies in Yorkshire & Humber recorded a ninth successive reduction in new business during January. Slowing market conditions and less demand from existing clients led sales performances to worsen, according to anecdotal evidence.

Although the deterioration in new orders was the slowest since June last year, Yorkshire & Humber was the second-worst performer of the 12 monitored UK areas, with only neighbouring North East seeing a sharper decline.

The Future Activity Index was firmly inside optimistic territory, signalling strong projections of higher output in the next 12 months, but it fell to a three-month low and was below its long-run average. Subsequently, this pointed to weak growth expectations by historical standards.

Investment plans, new product development and expected market share gains were reasons given by optimistic firms, although persistent weakness in demand warranted a cautious view, according to others.

The seasonally adjusted Employment Index rose, but held close to the 50.0 no-change threshold at the beginning of the year, indicating a fractional uplift in workforce numbers across Yorkshire & Humber’s private sector. Recruitment efforts were broad, with both permanent and temporary staff hired, according to respondents. Some companies opted to not replace voluntary leavers.

Compared to the UK aggregate, Yorkshire & Humber slightly underperformed, as employment growth recovered to a six-month high.

Private sector businesses in Yorkshire & Humber reduced their backlogs of work again in January, extending the current sequence of depletion to nearly a year. The pace of decrease matched that seen in the previous month, and was therefore the joint-softest since last July.

Operating expenses faced by private sector businesses in Yorkshire & Humber rose at a steep pace during January. Higher shipping costs were mentioned by manufacturers, while service providers linked inflationary pressures to greater wage bills. The overall rate of increase in input prices was slightly softer than the UK average, but nonetheless the fifth-strongest of the 12 monitored parts of the UK.

Yorkshire & Humber companies lifted their prices charged for goods and services during the latest survey period. Higher charges often reflected the passing on of higher costs to clients. That said, the overall rate of inflation was one of the slowest recorded since the end of 2020 and was much weaker than seen for the UK as a whole.

Malcolm Buchanan, chair of the NatWest North Regional Board, said: “The local economy in Yorkshire & Humber is on an upward path. All in all, it seems the slump in the region’s activity was short-lived, and business conditions are now steadily improving.

“Although growth in January was only modest and business confidence remains historically weak, incremental improvements in the underlying data for activity and new business suggest that momentum is at least picking up.

“Heavy job losses have also been averted, in part supported by backlogs of work. Cooling price pressures and the prospect of falling borrowing costs this year will add further upside for local business.”

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