- Quicker expansion in output amid stronger rise in new orders
- Cost pressures build further
- Slowest decrease in backlogs since May
Output levels at Welsh firms increased at a notably faster pace in October, according to the NatWest Cymru Growth Tracker, amid stronger demand conditions.
The headline Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the area's manufacturing and service sectors – posted 53.2 in October, up from 50.6 in September, and signalled the steepest expansion in output since June 2022. The rise in business activity was supported by stronger demand conditions, as new orders increased at the quickest rate since June 2025.
Nonetheless, companies continued to lower headcounts and business confidence slipped from September's recent high. Backlogs of work fell further, but at the slowest pace since May.
At the same time, input cost inflation strengthened to the fastest in four months, but selling prices rose at the weakest rate since January.
Jessica Shipman, Chair, NatWest Cymru Board, said:
"Welsh businesses began the fourth quarter on a positive note, as activity and new orders expanded at much quicker rates amid stronger customer demand. Moreover, the rate of output growth was the steepest since June 2022. More accommodative demand conditions also supported continued confidence among businesses in an upturn in output over the coming year.
"Challenges remained in underlying data, however. Cost pressures continued to strengthen and place strain on balance sheets, as firms noted targeting a reduction in headcounts amid sufficient capacity to process incoming work. Previously weak demand and economic uncertainty have led to hesitancy among firms to expand employment despite more upbeat demand. At the same time, selling prices increased at the slowest pace since January as efforts to retain clients led to discounting."
Performance in relation to UK
October data signalled a stronger expansion in business activity at Welsh companies. The solid upturn was one of the most marked across the UK, with only the South East recording a steeper rate of growth in output.
Welsh businesses recorded a second successive monthly upturn in new business during October. The rate of growth quickened notably to the sharpest since June 2025 and was faster than the series average. Welsh firms signalled one of the strongest upturns in new orders of the 12 monitored UK areas, with only the South East and Yorkshire & Humber recording quicker expansions.
October data indicated another solid round of job cuts at Welsh companies. The rate of contraction in employment gained pace from September and was the sharpest of the 12 monitored UK areas.
Although backlogs of work continued to decline in October, the pace of the latest decrease was the slowest since May. Welsh firms stated that they had sufficient capacity to work through incoming new business. The rate of depletion in outstanding work was the quickest of the 12 UK areas, meanwhile.
Average input costs at Welsh companies increased at a steeper pace at the start of the fourth quarter. The rate of inflation quickened for the third month running and was the fastest since June. As well as being sharper than the series average, the pace of increase was more marked than the UK trend.
That said, the pace of charge inflation eased again in October and was the slowest since January. Across the UK, only the East of England recorded a weaker rise in selling prices.
