The headline NatWest Yorkshire & Humber 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 back above the 50.0 no-change mark in May, rising to 50.5 from 47.3 in April.
The index therefore signalled a renewed expansion of output in the region’s private sector, ending a three-month sequence of reduction. That said, the rate of growth was only marginal and the slowest of the 12 regions and nations of the UK covered by the report.
The increase in business activity was in line with the picture for new orders, which also returned to growth during May. In turn, a renewed rise in employment was signalled. Meanwhile, input costs continued to rise sharply, albeit at a softer pace. Moreover, the rate of output price inflation was the slowest since September 2020.
May data signalled a renewed expansion in new orders at companies in the Yorkshire & Humber region, thereby ending a one-year sequence of decline. Greater sales volumes were reported by a number of companies, in some cases linked to successful advertising and improved market confidence.
That said, the rate of growth in new business was only fractional and weaker than the UK average.
Business sentiment was unchanged in May, remaining solid but just below the series average. More than half of respondents predicted a rise in output over the coming year, linked to business investment plans, plus expected improvements in new orders and economic conditions.
Manufacturers were more optimistic than their service sector counterparts.
Companies in Yorkshire & Humber responded to the return to growth of new orders by taking on additional staff in May. The slight rise in staffing levels ended a three-month sequence of job cuts.
Firms in the region increased employment to a slightly stronger degree than the UK average.
Although new orders increased in May, the marginal expansion was not strong enough to erase evidence of spare capacity in the region’s private sector. As such, backlogs of work decreased for the fifteenth consecutive month. The latest fall was solid, albeit the least marked for a year.
Outstanding business was down across both monitored sectors.
After hitting a one-year high in April, the rate of input cost inflation slowed sharply during May and was at a seven-month low. That said, input prices continued to rise at a marked pace. Where input costs increased, panellists reported higher wages and rises in prices for raw materials such as aluminium.
Service providers posted a much faster increase than manufacturers.
Although output prices continued to rise in May, the rate of inflation eased for the third consecutive month to the weakest since September 2020. In fact, the increase in charges in the region was the second-slowest of the 12 UK areas covered, faster only than the North West.
Some firms increased selling prices in line with higher input costs, but others indicated that muted demand had reduced their pricing power.
Malcolm Buchanan, Chair of the NatWest North Regional Board, said: “The latest PMI data for the Yorkshire & Humber region make for encouraging reading, with local firms seeing renewed increases in output, new orders and employment during the month.
“The hope will be that the recent soft patch is behind us and that growth can start to solidify and speed up over the coming months. One other development of note was that selling prices increased at the slowest pace in approaching four years, potentially providing a further boost to demand conditions.”
