Optimism among North West firms despite a tough December

According to the latest NatWest PMI, ongoing declines in new business continued to curb local output but rates of reduction moderated and employment was lifted. Tony McDonough reports

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Ongoing declines in new business continued to curb local output, says NatWest

 

Firms across the North West remained stuck in contraction at the end of 2019, new data shows – but there are signs of a possible upturn in 2020.

According to the latest NatWest PMI, ongoing declines in new business continued to curb local output in December. However, rates of reduction moderated and employment was lifted for the first time in four months as companies sought to expand capacity. Rates of both input cost and output charge inflation accelerated.

Despite rising from 47.4 in November to 48.7 in December, 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 – continued to point to falling output across the region.

The contraction was often linked by local firms to subdued demand, election disruptions and market uncertainty. The fall was the eighth in successive months, albeit the slowest since last July.

According to panel members, lower sales stemmed from weak underlying demand and lingering uncertainty. The downturn in new business across the North West compared with renewed growth at the UK level.

December data highlighted a 14th consecutive decline in outstanding business at private sector companies in the North West. Firms that reported lower backlogs commented on spare capacity arising from sluggish sales. Although marked, the overall rate of contraction eased from November.

Private sector jobs in the North West increased in December, thereby ending a three-month sequence of contraction. Among those companies that cited growth, there were mentions of capacity expansion plans and preparation for the introduction of new product lines. The pace of employment expansion was, however, only marginal.

Business sentiment remained positive in December, but the degree of optimism slipped in line with concerns over competitive pressures, economic uncertainty and fading growth in Europe. Local firms were among the least upbeat nationally.

Richard Topliss, chair of NatWest north regional board, said:Although the North West economy remained stuck in contraction at the end of 2019, some comfort can be taken from the slowdown in rates of reduction for local sales and output.

“Furthermore, renewed jobs growth and sustained optimism towards the year-ahead outlook for business activity bode well for a recovery in the near term. With Brexit uncertainty having restricted sales in recent months, we expect the UK’s new political scenery to provide a boost to the economic performance of the North West during 2020.”

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