Businesses across all areas of the UK recorded increases in activity levels in July, according to the latest NatWest Regional PMI® report. However, faster growth in Northern Ireland, Scotland and Wales contrasted with a slowdown in most English regions.
Northern Ireland's Business Activity Index registered at a six-month high of 56.6 in July, showing a sustained rebound in the pace of output growth from the weather-related disruption in March. The Index measures changes in the combined output of the region's manufacturing and service sectors, and any reading above 50.0 signifies growth from the previous month. The higher above the neutral 50.0 threshold, the faster the rate of expansion signalled.
Wales (55.6) and Scotland (55.1) also saw rates of business activity growth accelerate at the start of the third quarter. In the case of the latter, it was the strongest performance for four years.
The overall UK (53.6) picture was one of slower growth, however, which reflected weaker expansions in activity in six of the nine English regions monitored by the survey. The West and East Midlands (both 54.2) – June's strongest performers respectively – both saw a considerable loss of growth momentum, as was the case in London (53.1) and the North West (52.1). The South East (53.3) and South West (50.6) also recorded slower increases in business activity than in June.
The East of England (55.7) was one of the exceptions, recording a marked rate of growth that was unchanged since June and the second strongest overall (behind only Northern Ireland). In Yorkshire & Humber (55.0), output growth rebounded from June's three-month low, while the North East (50.2) saw activity rise marginally following a contraction in June.
Demand
Businesses in all monitored areas saw inflows of new orders increase in July, with those in Northern Ireland, Scotland and Wales recording the strongest rates of growth respectively.
Capacity
Employment growth in July was jointly led by the East Midlands and Yorkshire & Humber, though rates of job creation were subdued in the context of historical trends. The only notable decrease in staffing capacity was recorded in the North East, where net job losses were seen for the first time in five months.
Prices
The steepest rise in average selling prices was recorded in Northern Ireland, which also saw the second-strongest rate of input cost inflation behind the North East. London registered the weakest price pressures.
Outlook
In terms of business confidence towards the outlook for activity over the next year, firms in Yorkshire & Humber showed the greatest degree of optimism, ahead of those in the South East and East Midlands.
Sebastian Burnside, NatWest Chief Economist, commented:
“There was a clear divide in performance between the UK’s constituent parts in July. Whereas Northern Ireland, Wales and Scotland all recorded stronger business activity growth at the start of the third quarter, with the latter enjoying its best performance for four years, most English regions shifted down a gear. Reports from surveyed businesses suggested that the football World Cup had caused some disruption to activity.
“The overall picture for the labour market in July was one of only modest employment growth. Even the month’s top two performing regions in terms of hiring – the East Midlands and Yorkshire & Humber – recorded rates of job creation that paled in comparison to the highs seen in 2017.
“In some cases there were reports of difficulties finding suitable staff, but the slowdown in hiring also reflects the continuation of strong cost pressures which have forced firms to become more productive. Nowhere was this more apparent than in the North East, which saw the month’s only notable decrease in private sector staffing numbers as local firms reported another sharp squeeze on margins.”
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