Latest Regional PMI data from NatWest showed an ongoing broad-based recovery in business activity and employment across the UK in June. Rates of growth in business activity generally remained strong, but eased since May in most cases.
The rebound in demand for goods and services was accompanied by increasing inflationary pressures, with nine out of the 12 regions monitored by the survey posting record rises in prices charged as firms’ costs continued to soar.
The PMI Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.
The North West topped the regional growth rankings for a second straight month in June, its Business Activity Index coming in at 65.0. However, only Yorkshire & Humber (64.5) and London (61.9), which were ranked third and sixth overall respectively, saw faster increases in business activity compared to May. Northern Ireland* (58.2) and Scotland (58.4) were at the foot of the table, though even here rates of growth remained strong by historical standards.
Demand for goods and services continued to rise across all areas of the UK in June, as highlighted by a further broad-based increase in new business. Rates of growth were generally strong, though the North West and Wales saw particularly steep increases in new work. The East of England, which was one of eight regions where the pace of expansion eased since May, was at the bottom of the rankings for new business.
All 12 regions monitored by the survey saw a rise in outstanding business in June, in a sign of firms in every part of the UK struggling to keep pace with demand. The most marked increase was recorded in Wales, which was one of six areas where the rate of accumulation was at a series-record high, the others being the North West, Northern Ireland, East of England, South East and East Midlands.
The West Midlands led a broad-based increase in regional employment in June. Rates of job creation accelerated in five out of 12 cases and were unchanged in three others. Wales saw the greatest acceleration in the pace of workforce growth, although still ranked only ninth overall, ahead of Scotland, Northern Ireland and the North East.
Cost pressures continued to intensify across the board in June, with all regions and nations of the UK seeing faster rates of input price inflation. Northern Ireland once again reported the steepest overall rise in costs (by some margin), and was one of seven areas where the rate of inflation was at a record high. London saw the slowest rise in input prices, but even here the rate of inflation was among the fastest on record.
Rates of output price inflation reached record highs in nine of the 12 monitored regions in June. Northern Ireland continued to see by far the quickest increase in charges for goods and services, with the North West and Yorkshire & Humber ranked second and third respectively. Price pressures remained softest in London, where the rate of output charge inflation was at a near six-year high but still well below its historical peak.
Sentiment towards future activity was generally positive in June. However, only Wales (ranked third overall) and the South West (fifth) saw growth expectations improve since May. Firms in Yorkshire & Humber recorded the highest degree of optimism, as has been the case in five of the past six months, while those in Northern Ireland were the least upbeat.
Sebastian Burnside, NatWest Chief Economist, said “June’s PMI results rounded off a strong second quarter of growth for all UK regions and nations as business activity levels continued to bounce back following the gradual loosening of restrictions. Rates of expansion eased in most areas from the highs seen in May, though another broad-based rise in backlogs of work indicates that supply still has some way to catch up with demand, indicating plenty of scope for further increases in business activity and employment throughout the UK as we head into the third quarter.”
“At the same time, however, we’re seeing businesses in all corners of the UK coming under increased pressure from rising costs. This is underscored by three-quarters of UK regions registering record inflation in prices charged for goods and services. Notably, we continue to see marked variations in regional inflation, with London recording well below average rates of increase in costs and output prices.”