April another ‘solid month’ for Welsh business activity, reveals NatWest PMI

The latest NatWest Wales PMI^® data signalled another solid monthly increase in business activity in April, supported by a sustained rise in new business. Nonetheless, slightly softer new order growth allowed firms to clear backlogs for the first time since January. Firms also reined in their hiring activity, with workforce numbers broadly unchanged from March. Inflationary pressures remained elevated despite a softer increase in input prices, as output charges rose at a quicker pace.

Meanwhile, expectations of further new order growth and increased marketing drove business confidence to the highest since last October.

The headline Wales Business Activity Index – a seasonally adjusted index that measures the combined output of the manufacturing and service sectors –  posted 53.0 in April, broadly in line with a reading of 52.9 in March. The solid rise in business activity was linked to favourable demand conditions and the acquisition of new clients. Furthermore, the rate of expansion was the second-strongest of the 12 monitored UK areas.

Welsh private sector firms registered a solid expansion in new business in April, with the rate of growth softening slightly from March’s six-month high. Stronger demand across the manufacturing and service sectors drove the increase. The upturn contrasted with a marginal contraction seen at the UK level.

April data signalled a renewed fall in backlogs across Wales. The decline was only marginal and slower than that seen across the UK as a whole. A softer rise in new orders reportedly allowed firms to work through outstanding business.

Meanwhile, firms indicated broadly unchanged workforce numbers in April. The seasonally adjusted Employment Index was largely in line with the UK trend. Some firms stated that hiring has risen following a sustained increase in new orders, however, others noted that voluntary leavers were yet to be replaced.

Input prices faced by Welsh private sector firms rose further in April. Although the rate of inflation remained marked, it was the softest since January and slightly below the UK average. Higher cost burdens were linked to greater wages and supplier prices.

Solid new business growth and steep input price rises drove another monthly increase in output charges. The accelerated rate of inflation was attributed to larger cost burdens.

Output expectations across Wales improved in April, with manufacturers and service providers registering a stronger degree of confidence towards the year ahead. Optimism was often linked to new client acquisitions.

 Kevin Morgan, NatWest Wales Regional Board, commented:

“Welsh firms remained among the strongest performing UK areas in April. Business activity and new orders continued to increase solidly despite fewer reports of Brexit stockpiling among customers. Instead, new client acquisitions and more favourable demand conditions were the driving forces and led to the highest degree of business confidence towards output over the coming year for six months.

“Meanwhile, Welsh firms were able to increase their selling prices at a solid and faster rate. Input costs rose markedly, but at a softer pace, with stronger demand allowing companies to partly pass on larger cost burdens to their customers.”