North West firms endure tough November but remain optimistic

Latest NatWest PMI index reveals a contraction in both business activity and employment but optimism on the back of expectations of greater clarity regarding Brexit. Tony McDonough reports

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Business endured a ‘challenging’ month in November, new data shows


Merseyside and North West firms experienced a “challenging” month in November with a contraction in both business activity and employment, new data shows.

However, there was also a fall in input cost inflation moderated, while business confidence improved on the back of expectations of greater clarity regarding Brexit, according to the latest NatWest PMI index.

After increasing to 49 in October, the headline NatWest North West Business Activity Index – a seasonally adjusted index that measures the change in the combined output of the region’s manufacturing and service sectors – fell to 47.4 in November.

The latest figure pointed to a solid and accelerated decline in private sector output. Where a reduction was signalled, survey members commented on weak underlying demand as well as election and Brexit disruptions.

New business inflows declined for the seventh month in a row midway through the final quarter of 2019. Having accelerated from October, the pace of contraction was the second-fastest over this period, slower than seen in September. Among the 10 UK regions whereby sales decreased, only Northern Ireland saw a steeper rate of reduction than the North West.

Faced with falling sales, North West firms focused on the completion of outstanding business in November. Backlogs of work decreased at a steep rate that was the most pronounced in over eight years.

In turn, spare capacity led to another monthly decline in employment. However, in contrast to the trends for sales and business activity, the  reduction in private sector jobs softened and was only slight.

Optimism among North West firms was sustained in November, with 41% of companies expecting output growth in the year ahead. Positive sentiment was underpinned by hopes that Brexit uncertainty will fade, while some panellists reported investment plans and the launch of new products. The overall level of confidence improved to a four-month high.

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