The service sector is driving the continued economic recovery as manufacturers grapple with ongoing supply chain issues.
The Natwest Yorkshire and Humber Business Activity Index showed continued strong growth – the strongest for five months – but those behind the analysis said it masked stagnant output.
Inflation is also soaring as prices have risen at a record pace to combat material, energy and transportation costs.
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Heather Waters, from NatWest’s North Regional Board, said: ‘At first glance, an overall index reading of 57.3 suggests that private sector business activity in Yorkshire and the Humber is growing at a healthy and healthy pace. . In fact, of the 12 UK regions monitored, only three others have seen faster recoveries – the North West, Wales and London.
“However, the survey highlighted some worrying trends under the hood. The biggest concern is the wide divergence in performance by sector. Growth in activity in November was entirely driven by services, with manufacturing output being stagnant overall.” This puts the fate of the broader recovery in a precarious position, as further growth depends on part of the economy given that the supply-related disruptions that are hampering manufacturers do not seem fade away anytime soon.”
The latest survey data signaled a further improvement in demand conditions faced by regional businesses in November. As has been the case for most of the year, private sector employment in Yorkshire and the Humber rose sharply in November.
The increase in recruitment is believed to be due to increased workload, as well as efforts to build capacity.
With manufacturing easing, backlogs have accumulated to a lesser extent since March.
Data-providing companies have seen the fastest rise in operating expenses on record – since 1997 – with inflation rates accelerating at both service providers and manufacturers.
Rising prices for a wide range of commodities have been exacerbated by rising energy and transport costs, survey respondents said, leading to the largest increase on record, surpassing the previous peak of October.
Confidence in future activity remains high, with the region home to the UK’s most optimistic business leaders. Policy shifts, continued economic recovery from the pandemic and firming demand were all cited as reasons to expect stronger growth in the year ahead.