New industry figures from the NatWest Bank suggest new orders are still growing, but at a slower rate than any time over the last seven months.
As the economy tries to adapt to life post-lockdown in the midst of the HGV driver crisis, a bank business tracker suggests raw material costs are going up steeply while the rate of job creation has eased to the slowest level since April.
The seasonally adjusted NatWest East Midlands Business Activity for September signalled a moderate expansion in output at the end of the third quarter.
Anecdotal evidence given to the bank’s researchers suggested that the upturn in activity was due to a sustained rise in client demand.
That said, growth was said to have been hampered by both labour and material shortages.
Private sector firms in the East Midlands signalled a further expansion in new orders during September, NatWest said.
Where an increase in new business was noted, companies linked this to stronger client demand.
The rate of growth softened again, however, to the slowest for seven months.
The pace of the upturn was also weaker than the UK average.
NatWest said East Midlands private sector firms signalled a robust degree of optimism during September, albeit slightly weaker than in August.
Business confidence was largely attributed to hopes of an uptick in client demand and further moves towards recovery from the Covid-19 pandemic.
Output expectations were stronger than the UK average.
Private sector firms in the East Midlands indicated another monthly rise in workforce numbers during September.
Companies commonly attributed the increase in employment to greater business requirements.
That said, the rate of job creation was the slowest for five months and weaker than the UK average amid labour shortages.
The level of outstanding business expanded further at the end of the third quarter.
The rise in backlogs of work was one of the fastest among the 12 monitored UK regions. Labour and material shortages reportedly exacerbated pressure on capacity.
The rate of growth in incomplete business was the second-fastest on record, easing slightly from August’s series high.
Average cost burdens increased markedly at the end of the third quarter, with the rate of input price inflation accelerating to the second-sharpest on record.
The pace of increase was also steeper than that seen across the UK as a whole.
Anecdotal evidence suggested the uptick in costs was due to greater labour and material prices, with transportation, metal and plastics costs mentioned in particular.
Private sector firms in the East Midlands indicated a marked rise in output charges during September.
The increase in selling prices was attributed to the pass-through of higher costs to clients, where possible.
The rate of charge inflation quickened from the previous survey period and was the second-fastest since August 2008.
John Maude, regional managing director for Natwest Business Banking across Midlands and East of England, said: “East Midlands private sector firms signalled a further move towards recovery during September, as business activity rose modestly.
“That said, client demand softened, as new orders expanded at the slowest pace for seven months.
“Firms also stated that capacity pressures following labour and material shortages exacerbated obstacles to output growth.
“At the same time, supply chain disruptions pushed raw material prices up, with the rate of cost inflation accelerating to the second-fastest in the series history.
“Output charges also increased at a near record pace, as firms sought to partially recoup higher cost burdens.”
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