North West business activity fell in August for first time in seven months

Business activity levels across the North West fell for the first time in seven months in August, according to the latest Regional PMI survey by high street bank NatWest.

The headline North West 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 – dropped to 47.2 in August, moving below the 50.0 no-change threshold separating growth from contraction for the first time since January. The region reflected the national picture, albeit with a sharper rate of contraction, with the UK as a whole recording a Business Activity Index of 48.6; only the South West and Yorkshire & Humber regions recorded more marked declines.

Analysis by the bank indicated the fall in business activity was the result of a longer-term trend in underlying data showing backlogs and inflows of work declining at businesses in the region throughout 2023.

Surveyed firms reported that the rising cost-of-living and uncertain economic outlook were weighing down on consumer demand. Despite this, inflationary pressures on businesses fell to their lowest reported level in three years, moving closer to pre-pandemic levels.

While hiring intentions also fell in August, private sector employment across the North West continued to rise. Businesses’ expectations towards future output also ticked up in August, after having sunk to a seven-month low at the start of the third quarter.

Malcolm Buchanan, Chair of NatWest North Regional Board, commented:

“Business activity in the region has unsurprisingly succumbed to the recent soft patch in demand, dropping for the first time in seven months in August. That said, the North West isn’t the only area under pressure, with output falling in eight of the 12 monitored regions midway through the third quarter. Reduced workloads and the absence of any real optimism among firms towards the outlook has placed the brakes on job creation in the region, although the fact that employment so far looks resilient is a positive. It’s also encouraging to see price pressures easing, with the survey’s measures of input cost and prices charged inflation both falling to 33-month lows.”