The headline NatWest East Midlands 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 – posted 51.1 in February, up notably from 47.3 in January.
The latest data signalled the first upturn in business activity since May 2022, albeit one that was only marginal overall. Greater output was linked by firms to increased new orders and more stable supply chains. The rate of growth was slower than the UK and long-run series averages, however.
Private sector firms in the East Midlands registered a renewed increase in new business during February. Although the expansion was only fractional overall, it brought to an end a nine-month sequence of decline. Firms noted that the return to growth in new orders stemmed from stronger client demand. Nonetheless, the rate of increase was slower than the UK average, which signalled a solid upturn.
East Midlands private sector firms’ expectations regarding the outlook for output over the coming year strengthened midway through the first quarter. Although still below the UK average, the degree of confidence was the highest since April 2022. Optimism was reportedly linked to investment in new products and services, and the acquisition of new clients. Manufacturers and service providers recorded stronger positive sentiment.
February data indicated a second successive monthly upturn in employment across the East Midlands private sector. Companies attributed the increase in workforce numbers to greater output requirements. The pace of expansion in staffing numbers was broadly in line with the long-run series average.
That said, the rate of job creation was only fractional overall and slower than the UK trend.
Private sector firms in the East Midlands recorded a fifth successive monthly contraction in backlogs of work in February. Anecdotal evidence suggested that lower levels of outstanding business were due to sufficient capacity to process incoming new work. The rate of decline eased to the slowest in three months, however.
The fall in work-in-hand contrasted with the UK average which indicated a fractional rise in backlogs.
Average cost burdens faced by East Midlands private sector firms increased at a marked pace again in February. Alongside higher supplier and material prices, companies linked higher costs to greater wage bills. The rate of inflation softened for the third month running to the slowest since March 2021.
That said, the pace of increase was among the fastest of the 12 monitored UK regions, fractionally slower than only London and Northern Ireland.
Selling prices at East Midlands private sector firms increased further midway through the first quarter. The rate of charge inflation was marked, as companies attributed hikes in selling prices to the pass-through of greater costs to clients. The rate of increase softened to the slowest since May 2021 and was weaker than the UK average.
Rashel Chowdhury, NatWest Midlands and East Regional Board, said: “East Midlands private sector firms signalled a renewed rise in output and new business during February, amid stronger demand conditions. Although only marginal, the latest data indicated an end to a sequence of contraction in business activity. Nonetheless, spare capacity was still seen across firms, as employment rose only fractionally.
“On a positive note, inflationary pressures softened again. Although still marked, rates of cost and selling price inflation slowed to the weakest in almost two years as supply chains improved and demand conditions remained subdued. Slower upticks partially supported stronger business confidence in the year-ahead outlook, which picked up to the highest in almost a year.”
