- Growth continues but at a slower rate this quarter.
- Price pressures tick higher.
- Employment falls for first time since April.
Regional growth tracker data from NatWest signalled another monthly increase in business activity levels across Yorkshire & Humber, marking a full quarter of expansion.
That said, after quickening to a 16-month high in August, the pace of increase in local private sector output slowed to a marginal pace and lagged behind the broader UK average. When compared with other 11 monitored parts of the UK, only Wales fared worse in September, with business activity here declining modestly since the previous month.
The headline Yorkshire & Humber PMI 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 – fell for the first time since June. At 50.4, the index was down from 51.9 in August and its lowest for three months.
Crucially, however, a reading above 50.0 indicated a third consecutive monthly expansion in total business activity, which was the longest growth sequence for the region since May 2023.
Malcolm Buchanan, Chair of the NatWest North Regional Board, said: “The latest regional growth tracker data for Yorkshire & Humber was pretty mixed. On the one hand, a third successive month of business activity growth is a real positive for the local economy, which has generally lagged the rest of the UK for much of the last 18 months. Another order book boost should give the current upturn further room to run.
“At the same time, local employment levels declined for the first time since April. Job cutting wasn’t a trend unique to just Yorkshire & Humber, however, as several other regions saw headcounts drop. Survey comments suggested that efficiency gains were a motivator. In a competitive environment, this is hardly surprising, as companies will look for ways they can give themselves the edge. This is especially true during inflationary periods, and price pressures actually ticked higher in September.”
Performance in relation to UK
Yorkshire & Humber businesses reported a further improvement in their new order inflows during September, although the pace of growth slowed markedly and underperformed the UK average.
New customer wins and more buoyant sales conditions helped lift firms’ order book volumes, anecdotal evidence showed. That said, growth momentum cooled again, with new business rising at the softest pace in three months.
Expectations regarding activity remained upbeat as firms predicted higher activity over the coming 12 months. New product launches, entry into new markets and hopes that strategic changes would come to fruition underpinned optimism. However, the level of confidence fell to its weakest since June. Some companies cited concerns towards potential government policy changes.
Despite sustained growth in new business and total activity, Yorkshire & Humber employment shrank for the first time since April at the end of the third quarter.
According to surveyed companies, cuts to headcounts were made to align staffing levels with overall workloads, although some companies noted that leavers were not replaced as part of efforts to boost efficiency. Lower employment locally contrasted with growth at the UK level in September.
Notably, Yorkshire & Humber firms recorded a marked decline in backlogs of work in September, signalling easing capacity pressures. In fact, the depletion in outstanding business seen locally was the sharpest of all 12 monitored UK areas. Quicker deliveries and improved component availability were reasons cited for the drop in pending orders.
Price pressures across Yorkshire & Humber intensified slightly at the end of the third quarter. Both input costs and output prices rose at rates that were in excess of their long-run averages.
Wages remained a principal source of input price inflation, anecdotal evidence showed, although transport cost pressures were noted in some instances. The overall rate of increase in operating expenses was sharp and similar to that seen across the UK as a whole.
September survey data pointed to a slight pick-up in output price inflation across Yorkshire & Humber. Higher charges often reflected the pass-through of costs. The extent to which local companies lifted their fees was broadly level with the year-to-date trend.
