Business output in the West Midlands appears to be on an upward trend, according to new research.
The West Midlands Purchasing Managers’ Index (PMI), which is published by NatWest and measures month-on-month change in the combined output of
the manufacturing and service sectors, rose to 54.2 in December from 50.5 in November.
NatWest said it was a signal of a solid rate of expansion that was the quickest since September in the West Midlands.
It added that the latest increase extended the current sequence of growth to seven months.
The upturn in business activity is attributed by firms to the reopening of some establishments following the end of the second national lockdown and stockpiling among clients due to Brexit preparations.
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December data highlighted a renewed upturn in new work intakes at West Midlands private sector companies.
Firms linked the rise to the reopening of some establishments following the end of the second lockdown, and stock-building efforts as clients prepared for the end of the Brexit transition period.
The overall rate of expansion in sales was only moderate, however.
Private sector companies in the West Midlands signalled a further decline in payroll numbers during December, the 11th in as many months.
According to survey participants, job shedding stemmed from redundancies and resignations.
The overall rate of employment contraction was, however, modest and the slowest since February last year.
The approval of covid-19 vaccines and predictions of new contract wins underpinned positive sentiment regarding the outlook for business activity and the overall degree of optimism strengthened to a five-month high in December.
Last month’s data pointed to growing pressure on the capacities of West Midlands private sector companies, as outstanding business increased.
The expansion ended a 28-month sequence of depletion, but was only slight.
Anecdotal evidence suggested that backlogs rose in line with staff shortages, a lack of available materials and new business growth.
West Midlands companies reported a further rise in expenses at the end of 2020, with the overall rate of cost inflation accelerating to the fastest in two-and-a-half years.
Close to one-third of panellists noted increases which they attributed to supplier list price adjustments and unfavourable exchange rates.
Amid reports of the pass-through of rising cost burdens to clients, average prices charged for goods and services in the West Midlands increased further in December.
The upturn was the seventh in consecutive months and the quickest since September 2018.
John Maude, a member of NatWest’s Midlands and East regional board, said: “It’s reassuring to see the economic recovery of the West Midlands was sustained in December and demand picked up after the end of the second national lockdown.
“Local firms responded to the uptick in sales by stepping up output and there were tentative signs of stabilisation in employment.
“Although job shedding persisted, the contraction eased considerably from November.
“December data indicated firms retained some pricing power, evidenced by the passing on of rising cost burdens to clients via upward adjustments to output charges.
“Business confidence improved in December amid hopes that covid-19 vaccines will become widely available and eventually lead to fewer restrictions on activity.
“While the latest results are positive overall, a third national lockdown at the start of 2021 will undoubtedly bring more challenges to local firms.”