Businesses off to a ‘good start’ to 2022, NatWest Business Activity Index reveals

BUSINESS activity in the South-West got off to a “strong” start in 2022, with increases in production and new works.

However, supply and labor shortages led to a sharper rise in backlogs, while costs remained historically high, according to the NatWest South West Business Activity Index.

The index, a seasonally adjusted monthly measure of output in the manufacturing and service sectors, fell from a nine-month low in December of 52.3 to 54.

Paul Edwards, Chairman of the NatWest South West Regional Board, said: “PMI data for January showed the South West had a strong start to 2022, with companies seeing stronger increases in production and new business as the impact of the Omicron wave has lessened. and increased customer demand.

“Companies also expressed greater optimism for the year ahead, with confidence about future production improving to its highest level in five months. However, shortages of materials and personnel – partly due to the illness due to COVID-19 – led to a faster increase in backlogs and further increased expenses.

“In order to fill vacancies and help build capacity, businesses in the region continued to ramp up hiring activities, although reports indicate that recruitment plans were constrained by skills shortages and greater competition for workers. »

January saw the 11th monthly rise in new orders at private sector companies, but the recovery was slower than the UK average.

Reports from panelists said the recovery from the pandemic, looser Covid restrictions and growing demand from domestic and overseas customers had boosted sales.

Business confidence about the one-year production outlook improved and the overall level of positive sentiment rose to its highest level in five months.

Employment has increased, with the rate of job creation declining slightly since December, but remaining much faster than the series average and high overall. The increase in staffing levels was generally attributed by panel members to increased customer demand and the need for more capacity.

However, difficulties were also reported in recruiting qualified staff and retaining current workers.

Rising sales, equipment and staff shortages and worker absenteeism due to the Covid-19 disease have led to a new backlog of work at private sector businesses in the South West. The rate of accumulation was the highest seen for six months and exceeded the UK-wide average. Outstanding business has now increased in each of the past 10 months.

Adjusted for seasonal variance, the input price index signaled another rapid increase in average input costs despite the inflation rate dropping to its lowest level in four months.

Anecdotal evidence has linked increased expenses to higher costs for energy, materials, fuel, and personnel. Higher transport costs have also been reported.

Across the UK, the rate of input price inflation accelerated to its second highest level on record and was slightly faster than that seen in the South West.

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