End of Covid rules sees resurgence of growth

THE relaxation of Covid-19 restrictions supported a notable rebound in growth across the West Midlands, according to new research.

The latest NatWest PMI report, which is a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors, was up noticeably from 51.9 in January to 58.4 in February.

This signalled the fastest rate of expansion in eight months, the high street bank said.

The upturn was associated with a strong improvement in demand conditions amid the end of restrictions yet, despite the uptick in growth, the region was in eighth place in the regional rankings for output.

February data showed back-toback increases in new business received by West Midlands private sector companies and the upturn was sharp and the strongest since last August.

According to surveyed firms, the expansion stemmed from improved client confidence, the relaxation of covid-19 restrictions and favourable demand conditions.

West Midlands companies continued to report higher operating expenses in February, with the overall rate of inflation accelerating to the second-highest since data collection started in January 1997.

Companies reported higher commodity, energy, freight, fuel, raw material and staff costs. Increases were in part linked to global shortages of items. Local firms recorded a stronger increase in input costs than that seen across the UK.

For the sixth month in a row, the rate of output price inflation in the West Midlands reached a series record during February (since November 1999).

Monitored companies that hiked their fees cited the partial passthrough of rising cost burdens to consumers and demand strength.

Regionally, the West Midlands was in fourth place with regards to output charge inflation midway through the first quarter.

As has been the case on a monthly basis throughout the past year, outstanding business volumes at West Midlands private sector firms rose in February. Although moderate, the rate of accumulation quickened to a three-month high and was historically elevated.

Panellists indicated that staff shortages, delivery delays, raw material scarcity, supply-chain issues and strong sales all led to higher backlogs.

Amid reports of buoyant demand conditions and efforts to clear backlogs, private sector companies in the West Midlands continued to hire extra staff in February.

Moreover, the rate of job creation was sharp, well above trend and the strongest since last October.

Private sector firms in the West Midlands remained strongly upbeat towards growth prospects, with the favourable demand environment expected to be sustained.

Companies forecast new client wins, a recovery in the automotive sector and productivity gains. Some indicated plans to lift investment and offer new products and services.

John Maude, from NatWest’s Midlands and East regional board, said: “On the one hand, the latest results show a welcoming rebound in economic growth across the West Midlands as the omicron wave faded and restrictions came to an end. Consumers were increasingly more confident about the outlook and stepped up purchasing accordingly.

“Firms then focused on expanding capacities to accommodate for the uptick in demand, meaning that more local jobs were created midway through the first quarter.

“On the other hand, price pressures continued to mount. Often linked to higher energy and staff costs, operating expenses rose at a near-record pace.

“Firms passed these on to consumers, with charge inflation reaching a record high in February.

“While ongoing squeezes to households’ budgets could restrict growth in the coming months, geopolitical tensions pose an additional threat to the outlook.”