The headline NatWest East Midlands PMI® 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 – posted at 51.2 in April, up fractionally from 51.0 in March, to signal a modest expansion in output at East Midlands firms.
The upturn in business activity was reportedly underpinned by more favourable demand conditions and a further rise in new orders. Of the 11 monitored UK regions to record a rise in output, the East Midlands registered the second-slowest upturn. Moreover, the rate of growth was slower than the long-run series average seen for the region.
East Midlands private sector firms registered a sharper rise in new business at the start of the second quarter, thereby extending the current sequence of expansion to four months. Anecdotal evidence suggested the increase in new orders was due to stronger client demand. The rate of growth was modest and the second-fastest since June 2023.
Business confidence among East Midlands firms remained upbeat in April, as companies continued to foresee a rise in output over the coming 12 months. Optimism was linked by firms to hopes of stronger customer demand and greater investment in new products. The level of positive sentiment sank to the weakest since December 2023, however, as higher input prices and muted customer demand subdued expectations.
April data signalled a tenth successive monthly drop in employment at East Midlands firms. The rate of job shedding picked up slightly and was the joint-quickest in five months. Cost-cutting initiatives and redundancies following subdued demand conditions sparked the latest round of staff cuts, according to firms.
The fall in employment contrasted with the UK trend which signalled broadly unchanged staffing numbers.
Adjusted for seasonal factors, the Outstanding Business Index indicated a further contraction in backlogs of work at East Midlands firms in April. The rate of decline was little-changed from that seen in March and solid overall. Companies noted that muted growth of new orders allowed them to process incoming new work in a timely manner.
Private sector firms in the East Midlands signalled a steeper increase in input prices during April, as the pace of inflation ticked up to the fastest in eight months. The marked rise in cost burdens was largely linked to higher wage bills – in part stemming from a hike in the minimum and National Living Wages – and greater imported goods prices following disruption to shipping through the Red Sea.
At the sector level, manufacturers and service providers recorded sharper upticks in costs, with the latter seeing a much quicker rise.
April data indicated a further, albeit softer, rise in selling prices set by East Midlands firms. Anecdotal evidence commonly attributed higher output charges to the pass-through of greater costs to customers. That said, the pace of inflation slowed to the second-weakest since January 2021 (behind only January). Although slower than the UK average, the rate of increase was slightly quicker than the long-run series trend for the region.
Rashel Chowdhury, NatWest Midlands and East Regional Board, said: “April data signalled a more positive start to the second quarter, as output rose further following a quicker uptick in new orders. The rise in new business was the second-fastest since last June amid stronger demand conditions. Firms continued to cut workforce numbers, but the pace of decline was only marginal overall.
“Cost burdens increased markedly on the month, as the larger increase in the minimum and National Living Wages pushed input prices up. Although the slowest for three months, the rise in selling prices remained historically elevated as firms were able to pass though greater costs to customers but maintain new sales growth.”
