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Welsh firms regain momentum with surge of new orders

Private sector firms in Wales recorded a further rise in business activity at the start of the third quarter, according to the NatWest PMI®, continuing a trend that has been observed since August 2016. Moreover, the rate of growth picked up from June. The acceleration was driven by a sharper rise in new business and a return to growth in employment, with the former contributing to an improvement in business confidence. Inflationary pressures eased, but remained elevated nonetheless. 

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The headline Wales Business Activity Index – a seasonally adjusted index that measures the combined output of the manufacturing and service sectors – posted 55.6 in July, up from 52.0 in June. This figure signalled the most marked expansion in output in five months, and one that was sharper than the long-run series average. The increase was broad-based across the manufacturing and service sectors, led by the former.

In comparison to other UK regions, Wales was second-best performing area on this metric, behind Northern Ireland.

The amount of new orders placed with private sector companies in Wales rose in July, thereby extending the current period of expansion to two years. Having eased to the weakest in this sequence during June, the rate of expansion accelerated in July, and was faster than the long-run series average. Growth was recorded by both manufacturers and service providers, led by the former.

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Compared to other UK regions, Welsh private sector companies performed the third best in July on this front, behind Northern Ireland and Scotland.

Boosted by a sharper rise in client demand, Welsh private sector firms raised their staffing numbers in July, following a decline at the end of the second quarter. The rate of the increase, however, was only marginal and weaker than seen across the UK as a whole.

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Enhanced operating capacities contributed to an eighth consecutive fall in the overall level of business outstanding in July. That said, the rate of backlog depletion eased to the weakest in this sequence and was slight overall.

Input cost inflation softened to an eight-month low in July. That said, the rate of increase remained elevated amid reports of higher aluminium and fuel costs. Service providers continued to record a sharper rise in cost burdens than their manufacturing counterparts.

Responding to greater cost burdens, firms raised their average selling prices in July.

Finally, firms maintained a firmly optimistic growth outlook during July. Moreover, the degree of positive sentiment improved from June.

Kevin Morgan, NatWest Wales Regional Board, commented:

“Growth in the Welsh private sector regained some momentum at the start of the third quarter, with business activity and new orders rising at sharper rates. In turn, this contributed to a return to growth of employment and a pickup in business confidence, boding well for further near-term growth.

“Compared to other UK regions, Wales remained among the best performing for both business activity and new orders.”

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