The latest NatWest Regional PMI® survey showed that nearly all areas of the UK recorded either slower growth or a fall in business activity in March. More positively, employment increased in six of the 12 monitored regions, twice the number seen in February.
The North West remained the UK’s main bright spot in March. At 53.7, its Business Activity Index was down slightly from 54.0 in February, but still indicative of a solid rate of growth overall.
The PMI Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50.0 indicates growth, and the further above the 50.0 mark the faster the rate of growth signalled.
Wales’s 52.9 was the second-highest reading, followed by 52.0 in both the East Midlands and Yorkshire & Humber – the latter being the only region where the pace of growth was unchanged since February. Output rose only marginally in the West Midlands (50.9), while it stagnated across the South East (50.0).
The South West (49.8), East of England (49.7) and Northern Ireland (48.0) each saw business activity fall into contraction, while sustained downturns were recorded across Scotland (49.6), the North East (48.3) and London (47.8).
Firms in Wales experienced the strongest rise in demand for goods and services in March. The only other notable increase in new orders was seen in the East Midlands, with firms in the West Midlands and South East reporting negligible growth. Order books decreased elsewhere, with the North East and London leading the decline.
Half of the 12 monitored areas saw a rise in employment in March. The North West and West Midlands jointly led job creation, ahead of the South East and Yorkshire & Humber. The North East again saw the steepest fall in jobs, while there were also notable declines in Northern Ireland and London. Capacity pressures were generally subdued, with only Wales and the East Midlands recording a rise in backlogs.
The East Midlands saw the steepest rise in output prices in March, and was one of only two regions where the rate of inflation ticked up since February. The other was the East of England, though even here the rate of inflation was close to the lowest in over two-and-a-half years. Notably, London saw no change in average selling prices, following an increase in each of the previous 27 months.
Cost pressures were strongest overall in Northern Ireland and the North West, with both recording identical rates of inflation that were slightly quicker than those seen in February. At the other end of the scale, the West Midlands, North East and South East each recorded slower increases in input prices. In the case of the former, the rate of inflation was the weakest seen since June 2016.
The strongest optimism towards future output was in the East Midlands, where expectations were the highest since November last year. Improved confidence was also seen in the South West, Yorkshire & Humber and the West Midlands – ranked second, third and fourth respectively. Firms in Wales recorded the sharpest deterioration in optimism, while those in Northern Ireland reported overall pessimism for the second straight month.
Sebastian Burnside, NatWest Chief Economist, commented: “Weaker trends were observed across nearly all areas of the UK in March, a reflection of the challenging business climate. For the North West, Wales and East and West Midlands this meant slower growth, while in most of the remaining areas business activity fell since February.
“There was better news on the employment front as half of the areas of the UK saw net job creation in March, up from just three in February. However, workforce numbers were partly boosted by temporary Brexit preparation measures and the survey’s new order data – which is perhaps the best gauge of underlying demand – painted a gloomier picture, showing inflows of new work falling across the highest number of regions since July 2016 in the aftermath of the EU referendum.
“The slowdown in the economy is translating into generally weaker inflationary pressures as firms’ pricing power continues to wane, with March’s survey showing a slower rate of increase in goods and services prices in nine of the twelve regions, and no change at all in charges set by firms in the capital.”