Index identifies upturn in business activity across region
Job creation in the region has quickened to near-record rate and business confidence strengthened, according to the latest NatWest East Midlands Business Activity Index.
The seasonally adjusted index measures the month-on-month change in the combined output of the region’s manufacturing and service sectors.
The latest data indicated a solid upturn in business activity across the East Midlands private sector, albeit at a softer pace.
As well as ongoing supply-chain disruption, the expansion in output was hampered by the spread of the Omicron variant. Data showed that this affected the service sector in particular. The rate of increase in output at firms in the region was slightly slower than the UK average.
Private sector firms across the East Midlands signalled only a slight expansion in new business during December.
The rate of growth slowed to the joint-softest for ten months amid subdued demand conditions following the emergence and spread of the Omicron variant. The pace of the upturn was slower than the UK average, but reflected the wider trend across all regions of more muted client demand.
East Midlands firms registered stronger expectations regarding the outlook for output over the coming year at the end of 2021. The degree of confidence was the highest for three months amid hopes of greater client demand in 2022, and an end to Covid-19 uncertainty as the year progresses.
Buoyant sentiment across the region was stronger than that seen across the UK as a whole, with manufacturers more upbeat than their service sector counterparts.
December data signalled a steep pace of job creation across the East Midlands private sector. The rise in employment was the second-fastest on record (since January 1997) and, alongside the East of England, was the second-sharpest of the 12 monitored UK regions.
Greater staffing levels were linked by firms to the replacement of voluntary leavers and the filling of outstanding vacancies.
Private sector firms in the East Midlands recorded only a marginal rise in backlogs of work at the end of 2021. The rate of expansion in outstanding business softened to the slowest for nine months but was broadly in line with the UK average which also eased. Firms in the region noted that supply-chain disruption and staff shortages drove work-in-hand up. That said, some companies stated that the upturn moved towards moderation amid softer demand conditions.
John Maude, from the NatWest Midlands and East Regional Board, commented: “December data signalled a solid end to 2021 for private sector firms in the East Midlands, despite ongoing supply-chain disruption and the spread of the Omicron variant.
"Business activity in the vulnerable service sector was resilient but new orders began to wane, with total private sector sales growth slipping to the joint-slowest in ten months.
"Despite signs of a slowdown, the rate of job creation accelerated to the second-fastest in 25 years of data collection, as firms sought to quell pressure on capacity. That said, increased wage bills and material shortages pushed cost burdens up again. Paces of input price and output charge inflation remained historically elevated as firms passed through higher costs to clients where possible."
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