NatWest report sees business activity in South West steady

This development breaks a four-month period of regional decline and contrasts with a continual dip in performance across the UK as a whole.

Commenting on the report, Paul Edwards, Chair of the NatWest South West Regional Board said: "The latest PMI survey brought some encouraging signs that business conditions steadied across the South West at the start of the fourth quarter.

"Firms registered stable activity following four months of decline, and new business fell at the softest rate in five months.

"Combined with indications that overall cost pressures are easing, this helped to boost business confidence around the 12-month outlook for output.

"Nevertheless, both input costs and selling prices continued to increase at elevated rates as companies reported further hikes in staff, raw material and energy costs.

"There are still signs of spare capacity in the sector too, with backlogs of work declining again, which contributed to a modest drop in employment.

"Overall, the more stable picture is a positive development, but firmer demand conditions and a sustained improvement in sales will be needed to put the sector on a solid growth footing."

In particular, the regional PMI Business Activity Index, which measures month-on-month change in output for both manufacturing and service sectors, reflected this stability by being almost level at 50.1, compared to 47.8 in September.

Yet, not all sectors exhibited this pattern of growth.

The volume of new work administered to South West private firms slightly decreased at the onset of the last quarter of the year.

Some firms did attest to the effectiveness of their new business-winning strategies, though the effect was mitigated by a slowdown in market conditions reducing overall customer interest.

This pattern extended to the national level where new orders declined modestly for four consecutive months.

A ray of hope was represented in The Future Activity Index which continued to express optimism in regional private firms regarding the output forecast for the next 12 months.

The surge of positivity witnessed was an upward trend from a nine-month low back in September, slightly over the series average.

Hopes for a potential revival in customer demand and promptly amplified sales supported this upbeat forecast.

This optimism mirrored trends at a national level, with business confidence slightly dwindling in comparison with the South West.

Yet, employment dropped for the second consecutive month in October among private-sector firms in the South West.

Voluntary leavers and softer demand conditions were identified as triggers for this payroll decline.

However, this job-cutting trend was checked as it slowed down to a modest pace, comparable to the UK level.

Unfinished business experienced a decrease for the eighth month running in firms across the South West, though the pace of this reduction has been sluggish since April.

Reduced inflows of incoming new jobs were mentioned as responsible for an efficiency in completing unfinished work.

Finally, cost pressures eased further in South West private sector firms in October.

Despite remaining sharp, the increase in input prices was the softest since January 2021.

However, costs were reported to have risen in wages, raw materials, fuel, and energy sectors.

Similar patterns of a substantial, yet slower, marked increase in operating expenses were witnessed across the UK.