Stronger demand conditions, an upturn in new orders and a rebound away from pre-election uncertainty at customers seen in the previous survey period, led to a return to output growth in the East Midlands in August, according to data from the latest NatWest Growth tacker.
The NatWest East Midlands Growth Tracker – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – posted at 51.9 in August, up from 48.3 in July, to indicate a renewed expansion in output at East Midlands firms, following a slight contraction in July. The rate of growth was the fastest for three months, despite being below both the long-run and UK averages.
Private sector firms in the East Midlands signalled a renewed increase in new business during August, following back-to-back contractions in June and July. The rate of expansion was the quickest since March 2022 and faster than the series trend.
Anecdotal evidence suggested that stronger client demand and a release of pre-election uncertainty at customers supported the rise in new sales.
Although still historically elevated, the degree of confidence at companies eased from July. Hopes of an improved sales environment, plans for new product launches and tender applications all reportedly underpinned optimism, nonetheless, according to panellists.
Dipesh Mistry, Chair of the NatWest Midlands and East of England Regional Board, said: "August data pointed to a stronger performance across the East Midlands private sector, as output returned to growth on the back of a renewed expansion in new business that was the fastest since March 2022. An improvement in demand conditions also buoyed business confidence.
"Cost cutting efforts following previously weak customer interest led firms to reduce employment again despite outstanding business contracting at the slowest pace in almost two years.
On the price front, there was some reprieve for companies as, although among the fastest of the UK regions, the pace of cost inflation slowed. The uptick in client demand spurred firms to raise selling prices, meanwhile, and at the fastest rate since April."
The rate of growth in business activity in the East Midlands was among the slowest of the 12 monitored UK areas, with only the North East and Wales recording weaker expansions.
The pace of increase in new business was only slightly slower than the UK average, however, and solid overall.
August data indicated a softer rise in input costs at East Midlands companies. The pace of increase slowed to the weakest since May but was sharper than the UK average. The rate of inflation was marked overall and among the fastest of the 12 monitored UK regions, as businesses linked the uptick to higher wage, raw material and shipping costs.
Meanwhile, firms registered a quicker pace of selling price inflation in August. The rate of increase matched the UK average, but accelerated to the sharpest since April. The rise in output charges was often attributed to the pass-through of higher costs to customers.
Staffing numbers at East Midlands firms continued to fall midway through the third quarter, as has been the case each month for just over a year. The rate of job shedding accelerated slightly on the month and was the second-fastest since November 2023. Alongside the non-replacement of voluntary leavers, companies noted that job losses stemmed from cost cutting initiatives. Moreover, the pace of decline was the sharpest of the 12 monitored UK regions and areas.
Despite a further fall in employment, backlogs of work at East Midlands companies contracted again in August. The rate of contraction was slower than the UK average, however, and eased to the weakest since October 2022. Firms were reportedly able to deplete levels of incomplete business following previously weak customer demand.