First decline in business activity in seven months charted in August

A first decline in business activity for seven months has been recorded in Yorkshire and the Humber.

Demand conditions in the region were among the weakest in the UK according to the latest findings from NatWest’s PMI Business Activity Index. Combined output from manufacturing and service sectors slumped from 51.6 in July to 47 in August.

While analysts described the fall into contraction territory as moderate, it was the fastest since January 2021 – when Covid restrictions had returned to hamper the UK economy. Inflationary levels and reduced activity levels from clients was cited as reasoning.

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Malcolm Buchanan, Chair of the NatWest North Regional Board, said: “The latest survey data indicates a worsening of economic conditions within Yorkshire & the Humber midway through the third quarter as both activity and new orders contracted since July.

“The decrease in output was the quickest since January 2021 and outpaced the decline seen for the UK overall as the region was among the weakest performers in August.

Malcolm Buchanan, chair of the NatWest North Regional Board.
Malcolm Buchanan, chair of the NatWest North Regional Board.

“That said, some positives can be gleaned from the latest results. Employment growth remained resilient, while firms were still strongly optimistic towards the next 12 months, despite sentiment dipping slightly. Additionally, a further cooling of inflationary pressures will be welcomed. Still, firms’ operating expenses rose sharply amid reports of elevated wage pressures, suggesting that there is still significant progress to be made with respect to prices.”

The rate of decrease was the fastest seen since November 2022. Notably, of the 12 monitored parts of the UK, only the South West registered a steeper downturn in sales during August.

However, the region’s Future Activity Index remained well above the neutral 50.0 mark in August, signalling a strongly optimistic outlook towards activity over the next 12 months. Expectations of higher activity arising from the release of new products supported confidence at some companies, with others anticipating a rise in market share and a pick-up in sales performances later on in the year.

An eighth consecutive monthly expansion in staffing levels reflected the filling of long-held vacancies according to panel members.

August survey data signalled a further rise in spare capacity at private sector companies, as the seasonally adjusted Outstanding Business Index recorded a decline for a sixth month in a row. Moreover, the rate of depletion was the strongest since May 2020.

Private sector businesses in the region saw a further rise in their operating expenses during August. A number of panellists remarked on wage pressures. That said, while the overall pace of inflation was sharp and above its long-run average, it was the softest in almost three years.

Prices charged by private sector companies in Yorkshire & the Humber were increased once again in August, in line with the trend seen for over three years. Where a rise in selling charges was reported, firms linked this with greater cost pressures. However, the extent to which output prices were raised was the softest since January 2021.

Original artice – https://business-live.co.uk/all-about/yorkshire-humber

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