Business activity in the West Midlands was "broadly stagnant" in July as the region saw its second monthly fall in sales, the latest NatWest PMI report have revealed.
The headline Business Activity Index – a seasonally adjusted index measuring month-on-month change in the combined output of the region’s manufacturing and service sectors – fell from 51.1 to 50.3, moving closer to the 50.0 mark that shows the economy is entirely flat.
Those polled for the survey in the West Midlands said their growth was restricted by poor demand, subdued market confidence and inflationary pressures.
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While inflation remained an issue, the overall rate of input cost inflation in the West Midlands softened considerably to a 14-month low in July, with the region at the bottom of the UK rankings.
NatWest said anecdotal evidence pointed to higher commodity, energy, food, logistic, material and staff costs — often a result of sterling weakness, labour shortages and the war in Ukraine. But those price pressures were reportedly curbed by a reduction in input supply and demand imbalances.
The rate of output price inflation eased to a seven-month low, but remained historically high as several firms sought to transfer greater cost burdens through to clients.
Outstanding business volumes rose again - the seventeenth rise in successive months - with businesses citing longer delivery times, input shortages and absenteeism.
But firms continued to create jobs, with a positive balance of companies saying they had added jobs over the month - the 17th successive month of job creation.
Meanwhile West Midlands firms remained confident there would be a rise in output over the next 12 months.
John Maude, NatWest Midlands and East Regional Board, said: "Economic conditions in the West Midlands remained challenging in July as consumers trimmed expenses due to rising interest rates, acute price pressures and an uncertain outlook.
"Recession fears and political uncertainty dampened business sentiment, which was at its second-lowest level since October 2020. The combination of lower new business and subdued confidence resulted in near-stagnant output, but firms continued to fill-up local positions that were made vacant due to the pandemic.
"With demand cooling, inflationary pressures receded at the start of the third quarter. Although still sharp, the latest upturn in input costs was the slowest in 14 months and output charges increased at the weakest rate in the year-to-date."
