Private companies operating in the region’s manufacturing and service sectors have seen output decline at the fastest pace since January 2021, according to new research from NatWest.
The NatWest East Midlands Business Activity Index – a seasonally adjusted index that measures the month-to-month change in the combined output of the region’s manufacturing and services sectors – fell to 45 from 48.7 in July .0 in August.
Anecdotal evidence suggests the decline in business was due to weak customer demand and reduced customer purchasing power.
Private sector businesses in the East Midlands also saw a sharp contraction in new orders in August, NatWest said.
Manufacturers recorded the largest decline of the two sectors tracked.
August data signaled a historically low level of confidence in production prospects over the year ahead in the East Midlands private sector. Although generally upbeat, the level of optimism was the second lowest since May 2020 as concerns over pressure on customer spending and rising prices weighed on sentiment.
Production expectations in the region were lower than the UK average, the index reveals.
Private sector businesses in the East Midlands continued to see an increase in employment midway through the third quarter as many were able to fill long-standing vacancies. However, the rate of job creation fell to its lowest level in nearly a year as companies struggled to retain staff and were forced to cut costs.
John Maude, Regional Managing Director of NatWest, said: “Businesses in the East Midlands reported tougher trading conditions in August as pressure on customer disposable incomes dampened spending and led to faster production contractions. and new business. Customer demand has plummeted, with new orders falling at the fastest rate since the initial COVID-19 lockdown in May 2020.
“Falling new orders led companies to prioritize cost-cutting efforts as employment grew at the slowest pace in nearly a year. Although rising from July, confidence in the outlook was the second lowest in more than two years, with inflation concerns weighing on sentiment.
“August saw slower increases in business spending and charges for goods and services. Nevertheless, inflationary pressure remained historically high amid soaring materials and energy bills.