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Birmingham Post
Birmingham Post
Business
Sion Barry

Private sector output in Wales strongest in the UK but still in negative terrain

Private sector output in Wales has improved slightly but remains in negative terrain, according to the latest research from NatWest.

Its seasonally adjusted Wales business activity index, that measures the month-on-month change in the combined output of manufacturing and service sectors – registered 49.8 in November, up from 49.1 in October to signal broadly unchanged levels of output. Anything below 50 denotes contraction.

The improved position was linked to a less marked contraction in new business. Alongside firms in the north east of England, Welsh companies registered the joint highest headline index reading, with the UK average indicating a modest decrease in business activity.

Welsh businesses also recorded a fourth successive monthly decline in new orders during November. Where a decrease was noted, firms linked this to weak demand conditions and material shortages. November’s data did see an improvement in business confidence across the Welsh private sector - although the second lowest since March 2020.

Hopes of greater client demand buoyed expectations, but concerns regarding further reductions in new orders and hikes in cost burdens weighed on positive sentiment.

The Welsh private sector firms registered only a fractional increase in workforce numbers midway through the fourth quarter. The rate of job creation was the slowest in the current 19-month sequence of employment growth. Firms stated that the slower upturn in staffing numbers was due to cost-cutting efforts and lower new business. The rate of increase was weaker than the UK average.

Gemma Casey, NatWest ecosystem manager for Wales, said: “Firms in the Welsh private sector signalled a moderation in contractions in output and new orders during November. Demand conditions remained subdued, but the pace of decline eased notably from October.

Nonetheless, firms were cautious in their expectations for the future. Business confidence was historically muted, and employment rose at only a fractional pace that was the slowest in over a year-and-a-half of job creation.

“More encouragingly, however, were downwards adjustments to inflation figures as input prices and output charges increased at softer rates. Although still marked, hikes in cost burdens and selling prices were much slower than seen earlier in the year. Pressure on customer spending as disposable incomes dwindle remains a key concern for firms, however, as the cost-of-living crisis persists.”

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