A top NatWest boss in the North West has said companies in the region are "holding on to hopes that the lull in demand will be temporary" and that activity will increase over the next 12 months but warned that is contingent on a "number of things, not least developments in inflation".
Richard Topliss, who chairs the bank's North Regional Board, made the comments after new figures revealed that although business activity across the North West rose in July, the rate of growth was only modest and below the UK average.
The latest regional PMI data from NatWest also shows there were further signs of demand coming under pressure from high inflation, as inflows of new work in the region fell for the first time in almost a year-and-a-half.
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At 51.1 in July, down slightly from June’s 51.2, the headline North West 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 – registered above but close to the 50.0 threshold that separates growth from contraction. This was the lowest reading for six months and compared with a UK-wide figure of 52.1.
The amount of new business placed with firms in the North West fell during July, ending a 16-month sequence of growth and highlighting growing headwinds to demand. A number of surveyed companies commented on reluctance among customers due to a backdrop of uncertainty, sharply rising prices and supply chain frictions.
Although only modest, the decline in inflows of new work – which was centred on the region's manufacturing sector – contrasted with a sustained (albeit modest) rise across the UK as a whole.
Mr Topliss said: "Growth of activity in July was only modest and largely achieved through progress on backlogs of work built up in previous months.
"But with those backlogs starting to fall more rapidly, there is a threat to near-term output prospects unless demand revives.
"Firms in the region are holding on to hopes that the lull in demand will be temporary and that activity will increase over the next 12 months, but that's contingent on a number of things, not least developments in inflation.
"Rates of increase in firms' costs and output prices remained steep in July, although they continued to retreat from their record highs earlier in the year due in part to the effects of weakening demand."
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