Private sector output in Wales has moved back in positive terrain with the best performance of any UK nation or region, shows latest research from NatWest.
It Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the manufacturing and service sectors – registered 52 in December, up from 49.8 in November. The rise in output was the fastest since June, with companies linking the expansion to greater client demand and a renewed increase in new business. Welsh firms were the best performing of the 12 monitored UK areas and bucked the wider UK trend, which indicated a marginal contraction in output.
Anything below 50 denotes contraction.
Welsh private sector firms also recorded a return to growth in new business at the end of 2022, thereby ending a four-month sequence of contraction. Welsh businesses bucked the UK trend, with the average across the UK as a whole signalling a modest decline in new orders. Firms often stated that increased new business was due to stronger client demand. The rise in new orders was only marginal, however.
Output expectations for the year ahead amongst private sector firms strengthened for the second month running in December. Confidence reportedly stemmed from hopes of a pick up in client demand and investment in new products. The level of optimism was lower than the series and UK averages, however. Firms noted that efforts to keep costs down amid inflation concerns harmed expectations.
December’s data also signalled broadly unchanged levels of employment across the Welsh private sector, as the respective seasonally adjusted index posted fractionally above the 50 no change mark. A fall in manufacturing staffing numbers was offset by job creation in the service sector. The UK average indicated a marginal contraction in workforce numbers.
Moreover, private sector firms registered a slower fall in the level of outstanding business at the end of the year. The rate of decline was only marginal and the softest since May. The decrease in backlogs of work was largely linked to greater stability in supply chains which allowed firms to process incoming new business. That said, increased new order inflows led to the slower contraction.
The fall in incomplete business was slower than the UK average.
Kevin Morgan, of the NatWest Wales board, said: "Welsh firms ended the year on a promising note, as business activity and new orders returned to expansion territory in December. Modest upturns followed stronger demand conditions, with Wales the strongest performing monitored area of the UK. Nonetheless, cost pressures continued to impact business decisions, as employment was broadly unchanged amid cost cutting initiatives and reductions in temporary labour.
“Cost burdens and output charges continued to rise at historically elevated rates, as energy price hikes were passed through to customers. Inflationary pressures eased, however, amid reports of reductions in some key input prices.”
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