November data highlighted a fourth successive monthly fall in West Midlands output, according to new research.
The NatWest PMI report, a seasonally adjusted index that measures the month-on-month change in the combined output of the West Midlands' manufacturing and service sectors, said the rate of contraction quickened from October. It slipped from 49.6 to 48.8, the report said.
Companies that signalled a reduction in output mentioned lower sales, high stock levels at clients and subdued market confidence.
West Midlands companies reported a sixth consecutive monthly decline in new work intakes halfway through the fourth quarter.
Where a fall was noted, survey members mentioned subdued demand conditions, the cost-of-living crisis, future uncertainty and destocking among clients.
That said, the overall rate of contraction was slight and the weakest since July. The local reduction in sales was less pronounced than that seen at the UK level.
There were back-to-back expansions in outstanding business volumes at private sector firms in the West Midlands. Where growth was reported, panellists mentioned insufficient staff and a lack of key inputs.
However, pending workloads increased at a slight rate that was among the weakest in over a year-and-a-half.
Only two other UK regions registered higher backlogs, London and Yorkshire & Humber, with depletion recorded elsewhere.
In line with ongoing efforts to clear backlogs and fill existing positions as well as optimistic growth projections, West Midlands companies continued to hire additional workers in November.
However, the rate of increase was moderate and the slowest in the current 21-month sequence of expansion. Job creation was reportedly curbed by staff leaving in search of better pay elsewhere, retirements, redundancies and cost-cutting measures.
The West Midlands topped the regional rankings for employment in November. Latest data highlighted a further increase in the overall expense of private sector firms in the West Midlands.
Moreover, the rate of inflation was sharp, the strongest in five months and well above its long-run average. Survey participants reported higher energy, food, material, transportation, utility and wage costs.
The local rate of input cost inflation matched the UK average, with the West Midlands coming fifth in the regional rankings.
Prices charged for goods and services in the West Midlands rose in November, as has been the case on a monthly basis throughout the past two-and-a-half years. The overall rate of inflation was sharp and quickened from October.
Anecdotal evidence indicated that ongoing increases in input costs continued to be transferred through to clients. Only Wales and the East Midlands recorded a higher rate of charge inflation than that seen in the West Midlands.
After slipping to the lowest level in over two-and-a-half years in October, there was an improvement in confidence among West Midlands companies in November.
Firms pinned sentiment on hopes of contained inflation, lower interest rates, better trade conditions, advertising and new product releases.
That said, the overall degree of optimism remained subdued in the context of historical data amid recession concerns. Regionally, the West Midlands recorded the second-highest level of business confidence, behind Yorkshire and Humber.
Rashel Chowdhury, a member of NatWest's Midlands and east regional board, said: "November was another difficult month for West Midlands firms who cut output and became more cautious towards hiring due to ongoing declines in new work.
"Local employment expanded at the quickest pace of all 12 UK regions but growth slipped to a 21-month low amid redundancies, cost-cutting initiatives and staff leaving in search of higher pay elsewhere.
"It's becoming increasingly challenging for local businesses to address the cost-of-living crisis by upwardly adjusting pay, particularly as margins get squeezed by lower sales and rising costs.
"Indeed, inflation showed no signs of abating in November as a stronger upturn in expenses translated into a sharper rise in selling prices. Yet, the gap between the two measures was the widest since mid-year."
