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Business activity, sales and output continue to increase for West Midlands firms but at much slower rate – report

Written by on 13/12/2021



Business activity, sales and output continue to increase for businesses in the West Midlands – but at a much slower rate, according to a new report.

The latest NatWest PMI report found that the region’s private sector continued to expand in November – with output increasing to 54.3 – indicating a tenth successive increase.

But evidence shows that growth has lost momentum with the latest reading highlighting the slowest upturn since February.

And although private sector firms in the West Midlands continued to signal higher sales in November, the upturn slowed considerably to the weakest in the current nine-month sequence of expansion.

Where growth was reported, panellists mentioned improved market confidence, favourable demand and clients making purchases ahead of predicted price hikes.

READ MORE: NatWest aims to make 2022 a record-breaking year for Midlands entrepreneurs

Amid reports of higher fuel, labour, material and transportation costs, there was a further increase in expenses among private sector companies in the West Midlands. In most instances, price hikes were linked to shortages.

The West Midlands came fourth in the regional rankings for input prices, behind Northern Ireland, Wales and the East Midlands.

Elsewhere, the rate of output charge inflation in the West Midlands reached a series record – since November 1999 – for the third successive month, with evidence suggesting that additional cost burdens continued to be transferred through to customers.

Employment in the West Midlands continued to rise in November, stretching the current sequence of growth to nine months.

The rise in employment was linked to an increase in sales but growth was reportedly curbed by difficulties finding replacements for voluntary leavers.

The region’s firms also saw an increase in outstanding business volumes in November. The rate of accumulation softened to the slowest since July but remained substantial by historical standards.

Surveyed firms said the upturn in unfinished business was down to a combination of material and labour shortages as well as rising sales and delivery delays, but private sector firms remained confident that output would increase over the course of the coming 12 months.

Despite falling to a four-month low, the overall level of positive sentiment among the region’s firms remained above its long-run average, with optimism largely pinned on hopes that the pandemic would recede, boosting international travel and demand.

Some firms mentioned that new product launches and marketing efforts should support activity growth.

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John Maude, of the NatWest Midlands and East Regional Board, said: “Although the latest set of PMI data shows that current economic conditions in the West Midlands remained favourable in November, demand growth eased as local consumers encountered more expensive goods and services. Mirroring the slowdown in sales growth, business activity expanded at a softer pace.

“Lingering shortages of materials and labour inevitably pushed up overall expenses of West Midlands companies, who continued to transfer additional cost burdens through to clients.

“Input costs increased at an unseen rate, a trend that was seen in all UK regions bar Northern Ireland. Similarly, output charges rose at record rates in nine localities including the West Midlands.

“Although firms foresee growth in the year ahead, the outlook is clouded by mounting inflationary pressures, squeezed household budgets and threats from the omicron variant.”



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