Output growth ticks higher in the West Midlands in August, despite nearly stagnant sales

The NatWest Regional Growth Tracker data also showed softer increases in both input costs and local selling prices.

Rising to 52.2 in August from 51.2 in July, the headline West Midlands 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 the fastest increase in output for three months.

Panellists that signalled growth mentioned demand resilience and upbeat forecasts for the year ahead. A greater availability of raw materials also supported the completion of pending workloads, anecdotal evidence showed.

Companies indicated a further increase in new business intakes midway through the third quarter, stretching the current sequence of expansion to 19 months.

That said, the rate of growth was fractional and softer than in July. Firms that secured additional orders cited better demand for specific goods and services and prospects coming to fruition. Concurrently, some panellists reported reduced orders from clients, a lack of investment and fierce competition.

Input prices facing private sector companies in the West Midlands continued to rise in August, amid greater outlays on insurance premiums, labour and materials. That said, lower prices for energy and metals somewhat restricted cost pressures, which were at their weakest since October 2023.

Although selling prices rose markedly in the context of historical data, the rate of inflation eased to a joint 44-month low (equal to May) in August. Some panellists reportedly shared additional cost burdens with their clients, but others offered discounts due to competitive pressures and in a bid to secure new work.

Dipesh Mistry, Chair of the NatWest Midlands and East of England Regional Board, said: "The accelerated increase in business activity, contrasted by softer new order growth, indicated that August's expansion was largely driven by the completion of outstanding workloads.

"Local firms noted that intense competition limited sales volumes; however, we may witness a recovery in demand in the coming months if businesses are able to control price increases.

"With the West Midlands experiencing the joint-lowest cost pressures in the UK, local firms could have greater flexibility to price more competitively in the near term. Given the lack of pending workloads, a rebound in sales will be essential for companies to restart recruitment efforts."