With Omicron’s wave of COVID infections waning and virus containment measures reduced, February saw a sharp and accelerating increase in business activity in the North West.
According to the latest regional PMI data from NatWest, the Northwest Business Activity Index – a seasonally adjusted index that measures the month-to-month change in the combined output of the region’s manufacturing and services sectors – jumped from an 11-month low of 50.8 in January to 56.7, its highest since last November.
Growth in the region was broad-based in both manufacturing and services, although overall it was slower than the UK-wide average.
The latest data showed a strong recovery in demand for goods and services supplied by businesses in the North West in February. New work inflows rose sharply and at the fastest pace since July last year, with companies surveyed commenting on growing customer interest and successful sales campaigns.
Although much faster than the historical series trend, the rate of new business growth in the North West was slower than the UK-wide average in February.
Companies operating in the North West maintained a strongly positive business outlook for the coming year in February. Expectations held near January’s four-month high and were well above the historical series average (since July 2012). Companies hoped the impact of the pandemic would ease in the coming months, alongside an easing of supply constraints. Local manufacturers were more bullish than their service-sector counterparts.
The latest data showed a faster rise in private sector employment in the North West as local businesses stepped up efforts to expand their operating capacity. The pace of job creation picked up for the second consecutive month, the fastest since last October, and was faster than the UK-wide average. The underlying data showed that the increase in headcount was broad based by sector and led by services.
The combination of increased numbers of new jobs and constraints on business production due to shortages of equipment and personnel led to the creation of exceptional businesses in the private sector in the North West in February, the eleventh consecutive month in which this has been the case. Additionally, the rate of accumulation accelerated to a four-month high, although it remained below the highs seen in 2021.
Northwest businesses faced another sharp increase in operating expenses in February. The intermediate consumption price inflation rate has accelerated since January, bringing it closer to last November’s historic peak. Energy, materials, transportation and wages were all cited as sources of cost pressure, according to anecdotal evidence provided by surveyed companies.
Strong increases in input prices were recorded in both manufacturing and services, with the former continuing to record the fastest growth rate.
Many North West businesses sought to pass on rising costs to their customers by raising product prices in February, helped by stronger underlying demand. The inflation rate for average prices charged for goods and services has accelerated significantly since January and was the third fastest in the series’ history (dating back to 1999 for this particular series).
Richard Topliss, NatWest North Regional Council Chairman, said: “The North West had a much better month in terms of business activity in February as COVID cases fell sharply from their peak in January and Plan B restrictions have been lifted. Local labor market conditions continued to improve, with the employment growth rate reaching its highest level in four months and indicating a large number of people entering the labor market. The job market is becoming increasingly tight, pushing wages up at a time when companies are also under pressure due to the rising cost of energy, raw materials and transport.
“Inflation rates for input costs and output prices remain at near record highs, and they don’t look set to come down anytime soon given recent developments in energy and commodity markets.” During the investigation [between 10-24 February]businesses were very optimistic about the outlook, but the landscape has changed with Russia’s escalating invasion of Ukraine, which poses heightened risks to the region’s growth prospects.