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 – fell below the crucial 50.0 mark which separates growth from contraction in February, signalling a renewed drop in business activity across the region.
At 48.3, the index was down from January’s six-month high of 51.2. The fresh deterioration in private sector output contrasted with the overall UK trend, which was of sustained growth.
Notably, Yorkshire & Humber companies underperformed its regional peers on key barometers of economic health in February. For both new orders and employment, the region saw the fastest rate of decline out of the 12 monitored parts of the UK.
The seasonally adjusted New Business Index posted below the 50.0 no-change mark in February, signalling a tenth successive month of falling demand for Yorkshire & Humber goods and services. The rate of decline was modest, but worsened slightly. Sluggish market conditions reportedly weighed on customers’ appetite for new orders, anecdotal evidence showed.
Notably, of the 12 monitored UK regions, Yorkshire & Humber registered the fastest slump in sales.
After retreating in both December and January, Yorkshire & Humber firms’ 12-month growth expectations rebounded in February to a ten-month high. New product launches, strategic changes and efficiency improvements were all noted as reasons to be optimistic, according to survey respondents.
The overall level of optimism was slightly stronger than seen for the UK as a whole.
There was a renewed decline in private sector employment across Yorkshire & Humber during February. The respective seasonally adjusted index recorded below the 50 no-change mark for the first time in four months and pointed to a modest rate of job shedding.
As was the case with new orders, Yorkshire & Humber registered the strongest pace of decline in staffing levels of the 12 monitored UK regions. Redundancies and the non-replacement of leavers were methods through which employers cut their headcounts.
Softening capacity pressures within Yorkshire & Humber were evidenced by another month of falling backlogs of work in February. The seasonally adjusted Outstanding Business Index posted below the neutral 50.0 threshold for a twelfth successive month.
Overall, the rate of reduction in orders pending completion was solid and the fastest for three months. Some survey respondents noted that demand conditions were too weak to drive backlogs higher.
The latest PMI data showed a persistence of stubborn cost pressures for companies in Yorkshire & Humber midway through the first quarter. This was signalled by the seasonally adjusted Input Prices Index, which held firmly above both the 50.0 no-change mark and its long-term average (58.5 since 1997).
Where a rise in operating expenses was reported, increased transport costs were mentioned, while others noted greater wage pressures.
With input price pressures remaining steep, private sector firms in Yorkshire & Humber responded by lifting their selling fees in February. The rate of increase was strong and the fastest since July last year. Higher selling prices reflected the passing on of greater costs, anecdotal evidence showed.
Malcolm Buchanan, Chair of the NatWest North Regional Board, said: “After a promising rebound at the start of the year, Yorkshire & Humber’s economy has slipped into contraction again. What’s noteworthy is the region’s divergence from the wider UK trend, which was of robust expansion in February, and suggests the national recovery from recession will be a disjointed one at the regional level.
“Of concern are trends in employment and new business, which were the weakest seen across the 12 monitored parts of the UK. Companies are also struggling with still-elevated inflation and are passing this on to customers despite the weakness in their sales performances. That said, a rebound in business confidence suggests companies are expecting this setback to be temporary.”
