Output prospects brighten for businesses in the West Midlands
Reduced customer spending and a contraction in new orders isn’t dulling optimism amongst West Midlands’ businesses according to new research.
According to the latest NatWest Regional Growth Tracker, the West Midlands Business Activity Index fell from 48.9 in December to 47.2 in January.
The seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors indicated the quickest rate of contraction for four years. According to survey participants, the latest drop stemmed from subdued market confidence, the loss of existing clients and a general reduction in customer spending.
But West Midlands companies were hopeful that business conditions would improve over the course of the year, supporting output volumes. Panellists reported advertising, investment intentions and the planned launch of new products.
Anecdotally some of those businesses surveyed voiced concerns that interest rates will not fall as quickly as expected. Others indicated that weakness in the automotive and construction sectors dampened sales.
Prices charged for West Midlands goods and services continued to increase in January. Survey participants attributed the latest hike to the pass-through of rising fuel, material and labour costs to clients.
"West Midlands firms indicated that their customers became more conservative when placing new orders relative to December, according to our latest Regional Growth Tracker," said Lisa Phillips, Regional Managing Director, Midlands and East, Commercial Mid Markets.
"Local companies are already feeling the impact of planned National Insurance changes for employers as their suppliers reportedly hiked fees ahead its implementation.
“They were nevertheless optimistic that business activity will grow in the year ahead. The Bank of England’s interest rate cut last week means that policy is now less restrictive, with further loosening expected in the year ahead.”
