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Wales business activity expansion at 28-month low

The latest NatWest Wales PMI® data indicated a marginal rise in business activity across the Welsh private sector in November. The slowdown in output growth was reflective of a weaker expansion in new business.

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That said, firms continued to increase their workforce numbers and at the fastest rate since September 2017. This was largely in response to a sustained rise in business requirements and efforts to clear backlogs. Concurrently, firms expressed a lower degree of optimism towards future output. The level of confidence was the weakest since March 2013 amid increasing concerns surrounding Brexit.

The headline Wales Business Activity Index – a seasonally adjusted index that measures the combined output of the manufacturing and service sectors –  registered 51.7 in November, down from 53.6 in October. The rate of output growth was the weakest in the current 28-month sequence of expansion. Where a rise in output was reported, panellists linked this to a sustained increase in new orders. Some firms noted that client demand was much lower than earlier in the quarter, however.


Although new business received by goods producers and service providers across Wales continued to increase, the rate of expansion dipped to the slowest since July 2016. The weaker rise in new orders was attributed to a slowdown in domestic demand and uncertainty surrounding the UK’s exit from the EU.

Despite a slower rise in new business, firms in Wales increased their workforce numbers at a faster pace in November. The upturn in employment was the strongest since September 2017 and solid overall. Panellists stated that faster job creation was due to greater business requirements.

In response to increased hiring, backlogs at manufacturers and service providers decreased at a marginal rate in November. The fall was the tenth in the last 12 months, but slower than both the long-run and the UK averages.

November data signalled a sharp rate of input price inflation, but Welsh firms registered the slowest rise in cost burdens since July 2016. Although just above the series trend, the pace of increase was the weakest of the 12 monitored UK regions.

In line with a robust increase in input prices, output charges rose at a solid rate that was faster than the UK average, despite being the second-weakest since July 2016.

Business confidence dipped in November, with Welsh firms at their least upbeat since March 2013. Many companies linked concerns to ongoing Brexit uncertainty. The level of positive sentiment was also among the lowest of the 12 monitored UK regions.

Kevin Morgan, NatWest Wales Regional Board, commented:

“Private sector firms across Wales registered a slower upturn in output and new business in November. Lacklustre demand drove the weakest rise in activity since the immediate aftermath of the referendum, with some companies noting a shift in purchasing activity among clients.

“The one bright spot came in the form of job creation. Despite output growth slowing for the third month running, firms expanded their workforce numbers at a stronger rate, the fastest since September 2017.

“Output expectations for the coming year were, however, subdued. Optimism waned to the lowest since March 2013 as an unclear path regarding the UK’s exit from the EU created further uncertainty. Welsh companies were also among the least upbeat out of the 12 monitored UK regions, though we know these businesses are resilient and this is a key strength that will serve them well in 2019.”