Manufacturing and service sectors in Yorkshire report slump in business activity

NatWest’s 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, fell to 51.1 in July, its lowest mark in a year-and-a-half and a notable drop from 54.2 in June.

While the headline index was still indicative of growth, it signalled an expansion that was only mild and the weakest seen across the current sequence of increase which began in February 2021.

July survey data signalled the first drop in demand for Yorkshire goods and services for almost a year-and-a-half.

Both manufacturers and services firms registered lower intakes of new work.

Supply issues, order cancellations, high prices and sufficient stock levels at clients were all noted as reasons for weaker demand.

The Future Activity Index slumped to its lowest level since April 2020 during July, signalling weaker business confidence among firms in Yorkshire.

While more firms were expectant of growth over the next 12 months than those anticipating a drop, the level of positive sentiment dipped below its long-run average since July 2012.

Nevertheless, firms in Yorkshire were the most optimistic when compared to the 11 other monitored UK regions.

Private sector businesses across the region added to their payroll numbers once again in July, extending the current sequence of jobs growth to 18 months.

The expansion was strong and well in excess of its historical average. According to survey respondents, staffing levels were raised to boost operating capacities.

However, the increase in employment was the slowest in six months as some companies cut the headcount due to falling demand.

The seasonally adjusted Outstanding Business Index fell below the 50.0 no-change mark in July, signalling the first reduction in backlogs of work for 17 months.

According to sub-sector data, the drop was centred on services companies as manufacturers recorded a further, albeit weaker, increase in work-in-hand.

According to anecdotal evidence, surveyed firms were able to catch up on outstanding business due to lower demand.

Another rapid increase in prices charged for goods and services in Yorkshire was registered in July.

Richard Topliss, chairman of the NatWest North regional board, said: “The Yorkshire & Humber private sector registered a notable slowdown in growth at the start of the third quarter as the cost-of-living crisis, subdued client confidence, ongoing supply issues and rapid energy price inflation all weighed on the economy. Overall, July’s expansion was the softest in a year-and-a-half and only mild overall.

“Of concern will be the decline in private sector order books, highlighting the damaging impact that high inflation is having on demand.

“Confidence in the outlook has deteriorated, with business optimism slumping to its lowest level since the early stages of the Covid-19 pandemic in 2020.”

NatWest’s 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, fell to 51.1 in July, its lowest mark in a year-and-a-half and a notable drop from 54.2 in June.

While the headline index was still indicative of growth, it signalled an expansion that was only mild and the weakest seen across the current sequence of increase which began in February 2021.

July survey data signalled the first drop in demand for Yorkshire goods and services for almost a year-and-a-half.

Both manufacturers and services firms registered lower intakes of new work.

Supply issues, order cancellations, high prices and sufficient stock levels at clients were all noted as reasons for weaker demand.

The Future Activity Index slumped to its lowest level since April 2020 during July, signalling weaker business confidence among firms in Yorkshire.

While more firms were expectant of growth over the next 12 months than those anticipating a drop, the level of positive sentiment dipped below its long-run average since July 2012.

Nevertheless, firms in Yorkshire were the most optimistic when compared to the 11 other monitored UK regions.

Private sector businesses across the region added to their payroll numbers once again in July, extending the current sequence of jobs growth to 18 months.

The expansion was strong and well in excess of its historical average. According to survey respondents, staffing levels were raised to boost operating capacities.

However, the increase in employment was the slowest in six months as some companies cut the headcount due to falling demand.

The seasonally adjusted Outstanding Business Index fell below the 50.0 no-change mark in July, signalling the first reduction in backlogs of work for 17 months.

According to sub-sector data, the drop was centred on services companies as manufacturers recorded a further, albeit weaker, increase in work-in-hand.

According to anecdotal evidence, surveyed firms were able to catch up on outstanding business due to lower demand.

Another rapid increase in prices charged for goods and services in Yorkshire was registered in July.

Richard Topliss, chairman of the NatWest North regional board, said: “The Yorkshire & Humber private sector registered a notable slowdown in growth at the start of the third quarter as the cost-of-living crisis, subdued client confidence, ongoing supply issues and rapid energy price inflation all weighed on the economy. Overall, July’s expansion was the softest in a year-and-a-half and only mild overall.

“Of concern will be the decline in private sector order books, highlighting the damaging impact that high inflation is having on demand.

“Confidence in the outlook has deteriorated, with business optimism slumping to its lowest level since the early stages of the Covid-19 pandemic in 2020.”

Inflation respite for firms

Latest survey data signalled sharply rising input costs faced by private sector companies in Yorkshire. Higher energy, transport and raw material prices were accompanied by reports of wage pressures, according to panel comments.

However, the rate of inflation cooled to a 14-month low.

Compared to the 11 other monitored UK regions, only firms in the West Midlands recorded a softer rise in operating expenses during July.

Richard Topliss said: “If any positives are to be gleaned from the latest survey, it could be on the prices front, where input cost and output price inflation cooled further.”