Business activity among West Midlands firms ground to a halt in April as rising costs hampered demand, a new report has found.
Latest data from the NatWest PMI report shows activity fell from 59.1 in March to 54.5 in April, indicating the slowest rate of growth in three months.
Where output rose, companies mentioned new contract wins, expanded capacities and the catching up of projects that had been delayed due to covid-19, however the upturn was reportedly curbed by subdued demand conditions amid acute inflationary pressures and concerns around the cost of living.
Private sector firms operating in the region also registered a slower - but fractional - increase in sales last month, with subdued demand conditions and acute price pressures being blamed once again.
The West Midlands recorded the slowest upturn in sales out of the 11 UK regions that posted growth.
For the fourth successive month, the rate of input cost inflation across the West Midlands private sector quickened. The latest upturn was marked and the second-highest since the series started in January 1997. Companies indicated that price pressures stemmed from rising energy, food, fuel and staff costs. Increases were partly attributed to global shortages of materials and the invasion of Ukraine.
In line with ongoing increases in input costs, private sector firms in the West Midlands lifted their selling prices further at the start of the second quarter.
The overall rate of charge inflation was sharp and the highest since the series started in November 1999. Close to 47 per cent of survey participants reported a rise, with the remaining panellists signalling no change since March.
Local companies signalled a stronger increase in selling prices than that seen at the UK level.
Despite remaining positive, the level of sentiment among West Midlands firms fell to a 17-month low in April. Confidence weakened among both manufacturers and service providers.
Some companies expect new product launches, marketing efforts and expansion plans to support output over the course of the coming year. However, others were worried that inflationary pressures and energy price volatility would curb demand and business activity.
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Elsewhere, April data pointed to a marked and accelerated expansion in private sector jobs in the West Midlands, following a substantial slowdown in growth during March.
Those companies that took on additional workers indicated that retirees and voluntary leavers had been replaced. Yet, local jobs increased at a slower pace than that seen at the UK level, as has been the case in each month since last November.
Capacity pressures among West Midlands companies eased in April, with the overall rate of accumulation in backlogs fractional and the weakest in the current 14-month sequence of expansion. Where growth was reported, panellists mentioned input delivery delays, staff absence and difficulties sourcing some materials. Conversely, firms that noted a reduction cited subdued demand conditions and job creation.
John Maude, of the NatWest Midlands and East regional board, said: "The cost of living crisis and soaring bills started to have a negative impact on the West Midlands private sector economy, as consumers tighten their budgets to be able to afford essentials.
"Firms signalled broadly stagnant levels of new work intakes and were less optimistic towards the outlook. Regarding sales, only the North East posted a worse performance than the West Midlands out of the 12 UK regions.
"With input costs increasing at a near-record pace in April, the latest results showed an unprecedented upturn in selling prices in the West Midlands - a factor that is likely to restrict local sales further in the coming months."
