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Marked output expansion in Wales amid fastest rise in new orders on record

Cardiff

The headline NatWest Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – registered 64.7 in June, down slightly from 65.5 in May. Although slower than May’s series high, the rate of output growth was the second-fastest since data collection began in January 2001. In fact, the pace of expansion was one of the quickest of the 12 monitored UK areas. Companies stated that greater business activity stemmed from stronger client demand and the further reopening of the economy following the relaxation of COVID-19 restrictions.

Welsh private sector firms registered a marked expansion in new business in June, with the rate of growth quickening to the fastest on record. The pace of increase was also the second-sharpest of the 12 monitored UK areas, slower than only the North-West. Anecdotal evidence suggested that the upturn was linked to the reopening of customer-facing businesses and further relaxation in COVID-19 restrictions.

June data signalled a marked degree of optimism across the Welsh private sector. The level of positive sentiment was the highest since data collection for the series began in July 2012, and was the third-steepest of the 12 monitored UK areas (behind only Yorkshire & Humber and the South East). A number of respondents stated that confidence stemmed from the relaxation of COVID-19 restrictions and stronger client demand.

Welsh private sector firms signalled a second successive monthly expansion in workforce numbers in June. The rate of job creation accelerated to the fastest in just over six years despite being slightly slower than the UK average. Companies stated that the upturn in employment was due to greater new order inflows and pressure on capacity.

June data signalled a fourth consecutive monthly increase in backlogs of work across the Welsh private sector. The rate of accumulation quickened to the fastest on record and was the sharpest of the 12 monitored UK areas. Panellists attributed the rise in outstanding business to raw material and labour shortages, alongside a marked upturn in new orders.

Welsh private sector firms registered a quicker rise in cost burdens at the end of the second quarter. Anecdotal evidence suggested the rise in input costs was linked to greater wage and material costs amid shortages. The rate of cost inflation accelerated to the sharpest since data collection began in January 2001 and was steeper than the UK average.

Private sector firms across Wales signalled a further marked increase in selling prices in June, with the rate of inflation quickening to the fastest on record. The pace of increase was also sharper than that seen across the UK as a whole. Companies stated that higher charges stemmed from efforts to pass on greater costs to clients where possible.

Kevin Morgan, NatWest Wales Regional Board, commented:

“June signalled a further marked upturn in output and new orders across the Welsh private sector, but labour and material shortages were noted by some as weighing on activity growth. Although the rate of job creation was the fastest for just over six years, it couldn’t prevent the sharpest accumulation of backlogs on record.

“Alongside pressure on capacity, rates of input price and output charge inflation accelerated further. Reports of deteriorating vendor performance and greater staff costs pushed input prices up.

“Nevertheless, stronger client demand and the relaxation of COVID-19 restrictions boosted business confidence to the highest on record.”