The region’s business activity returned to ‘modest’ growth in July after an early summer lull, with only London and the North West recording a stronger improvement in performance.
Analysis of the latest NatWest Yorkshire & Humber PMI Business Activity Index saw manufacturing and service sector output rise from an unchanged 50.0 to 51.6 last month. And output prices also saw their lowest increase since February 2021, reflecting the inflationary slowdown.
There was, however, a third successive monthly deterioration in demand monitored, with the fall-off at its quickest for six months – and at a stronger rate than seen for the UK overall. Client hesitancy, subdued market conditions and destocking were cited by survey respondents as reasons for weaker sales performances.
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Business confidence did however tick higher in the latest survey period, with entry into new markets, new product launches and hopes of stronger demand underpinning the outlook. In fact, only the South East and West Midlands were more favourable.
Malcolm Buchanan, chair of the NatWest North Regional Board, said: “After being a laggard relative to the wider UK economy during previous months of 2023, the Yorkshire and Humber economy started the second half of the year as an outperformer, with business activity growth outstripping the UK average and only being bettered by the North West and London.
Malcolm Buchanan, chair of the NatWest North Regional Board. (Image: NatWest) “That said, question marks remain over the sustainability of growth as new orders fell for the third month running and at a quicker pace, while firms continue to run down their backlogs amid a lack of incoming new work.
“Weakening demand conditions, in tandem with a softening of cost pressures from last year’s highs, has however led some companies to offer discounts to their customers, particularly in the manufacturing sector. Subsequently, the rate of output price inflation cooled to its lowest since February 2021.”
Yorkshire and the Humber businesses continued to hire additional staff during July, extending the current sequence of job creation seen since the start of the year. Where a rise in employment was registered, some survey respondents linked this with the filling of long-held vacancies.
The rise in staffing capacity was only marginal and the slowest since March, amid reports of redundancies.
Outstanding business was in negative territory for a fifth successive month, underlining a sustained easing of pressure on operations.
July survey data signalled a further sharp rise in operating costs faced by private sector companies. Wage pressures, an uptick in transport costs and general inflation were some of the factors driving the increase in firms’ expenses.
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