Business activity continues to expand in Wales
Welsh business activity is continuing to expand according to the latest Lloyds Bank PMI report.
The Wales PMI posted 55.7 in July, down from 55.9 in June. A reading of above 50 signals expansion and below signals decline.
Although the rate of growth was fractionally weaker than during the previous month, expansion in business activity in Wales continued to outstrip the UK-wide average.
Business activity growth was boosted by an increase in new orders, which rose for the 12th month running.
The sustained uplift in new business also had a positive impact on employment, with Welsh firms continuing to create new jobs to deal with higher client demand.
However, input costs – such as the price of raw materials and wages – rose for the 21st month in a row. More than a third of respondents in Wales reported a rise in input costs compared with just 4% that reported a fall. Local firms passed on these cost increases to customers in the form of higher selling prices.
Companies across Wales remain confident about their future prospects, with optimism rising in July. Some firms linked the upturn in confidence to planned investment and positive sales forecasts.
The Lloyds Bank PMI, or purchasing managers’ index, is the leading economic health-check of UK regions. It is based on responses from manufacturers and services businesses about the volume of goods and services produced during July compared with a month earlier.
Allan Griffiths, regional director for SME Banking in Wales, Lloyds Bank Commercial Banking, said: “Companies in Wales experienced another solid month in July, and it’s positive to see that activity and new orders remain at a robust rate of growth.
“Despite this, input costs are continuing to cause concern for many firms, and the report indicates that manufacturers are feeling the pressure of rising costs more than those working in the service sectors. Another slight concern was a decline in the level of uncompleted work, which may restrict job growth in the coming months.
“With this in mind, it’s vital that companies continue to revisit their business plans, ensuring that they have the working capital available to navigate challenges and capitalise on new opportunities.”
Moreover, Britain’s biggest firms face a bumpy road ahead despite profits leaping more than 40% over the past year.
Annual pre-tax profits for UK plc jumped 41% to £22.7bn, according to The Share Centre’s profit watch report, as the robust UK economy and strong consumer spending bolstered growth.
Revenues also rose at the fastest rate since 2014, climbing 5.7% to £346.1bn.
However, the report warned that companies could struggle in the coming year amid an economic slowdown and a harsher environment for consumers.
Helal Miah, investment research analyst at The Share Centre said: “Looking ahead, the picture is much murkier.
“Since the beginning of the year, the domestic economy has slowed markedly, sparking a succession of profit warnings.
“The consumer has been living on borrowed time, and borrowed money.
“As the devaluation-induced spike in prices has bitten deep into household incomes, so consumer confidence and spending power has ebbed away.
“The UK economy is slowing, so even those companies that performed extremely well recently may not continue to do so.
“By contrast, those with significant overseas operations are likely to do better, following the upswing in global demand.”
The report, which covers FTSE 350 firms with year ends to March 31, said food retailers were the stand out performers, delivering more than £100bn in sales.