Businesses in the North West saw an 11th consecutive month of growth in January, new data from NatWest shows, but strong headwinds caused a significant slowdown. Tony McDonough
Growth among North West firms continued in January but slowed down considerably and came close to contraction – but optimism remains strong.
It was the 11th consecutive month of growth for the private sector in the region, according to the latest analysis from NatWest. But material shortages, staff absences due to COVID, and rising prices all combined to darken the outlook.
NatWest’s headline North West 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 – registered 50.8 in January, down from 53.1 in December.
The latest reading for the North West was only just above the 50 mark that separates growth from contraction and the lowest since February 2021. It was also below a UK average of 54.2. Having eased for the third month in a row, the rate of increase was the slowest in the current sequence and well below the national average.
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Underlying data pointed to modest increases in demand across the region’s manufacturing and service sectors. January saw an improvement in business confidence across the North West.
After having eased to a 12-month low in the previous survey period, firms’ expectations towards growth prospects in the year ahead rebounded to the highest since last September. Firms were hopeful of an end to the pandemic and an easing of supply constraints, while many also noted plans for increased investment.
Despite the slower increases in both activity and new business, the pace of job creation across the North West private sector continued to run at a robust clip. Employment growth in the region even ticked up for the first time in three months and outstripped the national rate.
Manufacturers and service providers alike reported taking on new staff to cope with higher demand and as part of planned expansions, with the two sectors seeing similarly strong rates of job creation.
Richard Topliss, chairman of NatWest north regional board, said: “Growth of the North West’s economy slowed at the turn of the year, as the region’s businesses faced multiple headwinds from material shortages, rising prices and the impact of the Omicron variant, not least on staff availability.
“Inflation remained a prominent feature of the survey, with historically high cost pressures leading many companies to raise prices charged for goods and services.
“Despite all the challenges facing local businesses, it’s encouraging to see that they remain optimistic about the outlook and are expecting a rebound in activity as 2022 progresses. This is helping to sustain a strong labour market recovery in the region, with employment growing at one of the quickest rates in the country”