North West sees modest growth in business activity in July

Business activity in the North West continued to rise in July, according to the findings of NatWest’s latest regional PMI survey.

The headline North West PMI Business Activity Index registered 51.9 in July, down slightly from June, but remaining above 50.0 threshold, below which indicates a contraction in the region’s economic output.

Underlying the modest growth in the regional economy, however, was a third consecutive fall in new work, with firms at their least optimistic this year in their outlook. Confidence in the North West sank to its lowest in 2023 so far and the region posted the greatest month-on-month decline of any part of the UK.

The survey found cost pressures on businesses across the region remained high, while increases in prices charged continued to slow, partly driven by discounting in the manufacturing sector. The rate of decline in backlogs of work across the North West private sector also continued to accelerate, with this again led by the region’s manufacturers.

Businesses also revealed they were slowing down in their rate of hiring. Despite this, the region again recorded a rise in employment in July, continuing a two-and-a-half-year trend in job creation in the North West and driven largely by hiring in the services sector.

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

“A further modest rise in business activity in the current business climate is of course a positive, but it does seem that growth is on borrowed time unless demand starts to pick up soon as inflows of new work fell for a third straight month. Jitters over the outlook for demand amid squeezed client budgets and higher interest rates have knocked business confidence, which is now at its lowest so far this year. Price increases for goods and services were the slowest for two-and-a-half years in July, in a sign that inflationary pressures continue to abate amid weaker pricing power among firms. However, rates of inflation remain above ‘normal’ levels due to persistently steep increases in the service sector, which in large part reflect wage demands.”