Private sector businesses see fall in output
OUTPUT in the Welsh private sector has experienced a further decline, according to latest research from NatWest.
Its PMI business activity index showed output slid from 49.9 in January to 47.5 in February. Anything below 50 denotes contractions. NatWest said anecdotal evidence pointed to lower activity due to subdued customer demand and supply chain issues.
Welsh businesses recorded a ninth successive monthly decrease in new orders during February, although the pace of contraction eased. Some firms noted signs of a pick-up in demand conditions, but others said the cost-ofliving crisis continued to dampen sales.
The downturn in new business was only fractional, but contrasted with a modest expansion seen across the UK as a whole.
February’s data also indicated a pickup in business confidence. The level of optimism rose to the highest since November 2021 and was broadly in line with the UK trend. Extensions to product ranges, investment in expanding customer bases and hopes of stronger client demand underpinned confidence.
Workforce numbers at Welsh companies fell for the seventh month running midway through the first quarter. Lower employment stemmed from the nonreplacement of voluntary leavers amid efforts to improve efficiency and cut costs. The pace of job shedding eased notably, however, and was the slowest since August 2023.
Firms also registered a further decline in outstanding business during February, extending the current sequence of contraction that began in May 2022. The fall in backlogs of work was sharp overall and quickened slightly from January.
Average cost burdens faced by Welsh companies increased at a marked pace during February. Although slower than the UK average, the rate of inflation quickened to the fastest since May 2023 and was sharper than the series average.
Welsh firms recorded a sharper rise in selling prices midway through the first quarter of the year.
The rate of change in inflation was the steepest since mid-2023 and broadly in line with the UK average. Companies n sought to pass through higher costs to customers via hikes in output prices.
Service providers led the increase in selling prices, with the pace of the uptick quickening on the month.
Jessica Shipman, chair of the NatWest Cymru board, said: “Welsh businesses signalled a faster fall in output during February, as supply chain issues continued to weigh on activity and production capacity. Nonetheless, the pace of decline in new business eased to only a fractional pace, amid some signs of demand conditions picking up. Moreover, business confidence jumped to the strongest since November 2021 as firms looked to expand product ranges and invest in marketing efforts.
“Meanwhile, inflationary pressures ticked up to the highest since the second quarter of 2023. Higher wage bills and imported goods prices drove the increase, with firms still seeking to pass through costs to customers. At the same time, firms sought to cut costs but continued to reduce workforce numbers as backlogs of work were depleted sharply.
“That said, the pace of job shedding was the least marked since August 2023 amid stronger business confidence.”