Deteriorating economic conditions, including “intense” costs pressures on firms, saw business activity continue to fall across the South West last month, new data shows. New business placed with private sector companies operating in the region declined sharply in November, according to a survey by NatWest.
The bank's South West 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 - signalled a fourth successive monthly decline in output.
Bosses told researchers the lower output was linked to a weak economic climate, rising prices and subsequent cuts to client spending.
The data pointed to rapidly growing input costs for South West private sector firms during November, the steepest since July, amid reports of higher staff wages, utility bills and raw material costs.
It comes after the monthly survey recorded October as having had one of the weakest business performances since the global financial crisis in March 2009, with one of the sharpest rate of contractions in activity for almost two years.
After dropping to a record low in September and October, confidence among South West firms for the year ahead had improved to the highest seen in five months, albeit well below historical trends.
Many of those who took part in the study said they were “hopeful” demand would improve next year, and new product launches could also support growth. However, a number of companies expressed concerns over the weaker economic climate, cost of living crisis and future consumer spending.
Although staffing levels across South West private sector firms increased for the second month in a row in November, the rate of job creation remained marginal overall.
The pace of payroll growth also remained weaker than that seen at the national level, despite the latter easing to a 21-month low. While some companies expanded their workforce numbers due to efforts to fill long-standing vacancies and to enhance capacity, others noted not replacing voluntary leavers had reduced staffing levels.
A reduction in work backlogs was also recorded, with businesses saying the lower intakes of new business had enabled them to work through unfinished orders.
Paul Edwards, chair of the NatWest South West Regional Board, said: “Until there is a meaningful improvement in demand conditions and an easing of cost pressures, employment and output are likely to remain under pressure in the months ahead."
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