Business activity across Wales’ private sector saw the fastest rate of growth last month for the first time since May 2022, according to new figures. According to the latest PMI data from NatWest, the sharp rise was linked to stronger client demand and a rise in new orders.
The headline Wales business activity index - which measures the month-on-month change in the combined output of the manufacturing and service sectors - registered 52.0 in March. This was up from 50.7 in February showing a growth in output across the Welsh private sector. Anything below 50 denotes contraction.
Although slower than the long-run series average, the rate of growth in activity was broadly in line with that seen across the UK as a whole. The data showed an upturn in inflows of new business across the Welsh private sector as firms registered a rise in new orders at the end of the first quarter this year.
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Anecdotal evidence suggested stronger client demand drove the upturn as client activity increased. The pace of expansion was slower than the UK average, but faster than the long-run series average for Welsh firms.
Business confidence across Wales strengthened for the fifth consecutive month, the highest since November 2021 and above the UK average. Firms attributed this increased confidence to greater client demand as well as planned investment in expansion and product development.
While workforce numbers in Wales fell for the third successive month, the fastest decline since the start of 2021 and the second-steepest fall in the UK after the North East of England. This decline was due to workers who had voluntarily left companies not being replaced and job shedding by organisations as part of cost-cutting measures.
The amount of outstanding business at firms in Wales shrunk for the eleventh month in a row in March, as companies had sufficient capacity to process incoming new work. Welsh firms registered the sharpest fall in incomplete business out of the whole of the UK.
While cost pressures for Welsh firms rose in March as higher wage bills and cost of materials drove inflation. Despite this, operating expenses rose at the slowest pace since February 2021, while the rate of cost inflation eased across the UK as a whole.
Selling prices also sharply rose last month as Welsh firms passed on cost increases to clients.
Gemma Casey, NatWest ecosystem manager for Wales, said: "March data signalled a more upbeat end to the first quarter for Welsh firms. Output grew at a faster pace, as new orders returned to expansion and rose solidly amid stronger client demand. Companies were also much more confident regarding the outlook for output over the coming year, as optimism reached the highest since November 2021.
"Nonetheless, firms engaged in cost-cutting measures as spare capacity expanded. Backlogs fell at a sharper pace, leading firms to reduce their workforce numbers at the quickest rate since early-2021. This contrasted with the wider UK trend, where employment stabilised.
"Although easing, inflationary pressures remained historically elevated. Despite some reports of moderations in material prices, increased wage bills contributed to hikes in input costs, with many passing on rising cost burdens to customers."
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