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The Purchasing Managers ’ Index ( PMI ) is an indicator of the prevailing direction of economic trends based on a monthly survey of supply chain managers .
Whilst cost pressures picked up to a 14-month high during Q2 in large part due to changes in the national living wage , competitive pressures have curbed charge inflation , and businesses are signalling upbeat forecasts for the medium-term .
Increased new order intakes , demand resilience and more favourable economic conditions underpinned the latest rise in output , anecdotal evidence showed .
The PMI increase from 51.2 in March to 51.3 in April indicates continued expansion for the South West , dating back to December 2023 .
The upturn was marked and the quickest since May 2022 . Monitored companies linked growth to better economic conditions and improved client confidence , besides demand strength and successful marketing efforts . The local rise in sales was the third-best of the 12 monitored UK regions and nations .
Not only did operating expenses at South West companies rise further in April , but also at the sharpest rate since February 2023 . According to panellists , materials and labour added to cost pressures . Changes to the national minimum wage , alongside rises in pay for more senior staff to maintain salary differentials , were widely reported as a source of inflation .
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The South West topped the rankings for cost inflation among the 12 monitored UK regions and nations , followed by London .
Despite the upturn in cost pressures , there was a softer increase in prices charged for South West goods and services in April . The rate of inflation remained historically elevated but dipped to the weakest since February 2021 . Some firms indicated that part of their additional cost burdens had been passed on to customers , while others refrained from adjusting their fees due to competitive pressures and client resistance to accept higher selling prices . Prices charged in the South West rose at a softer rate than across the UK as a whole .
April data indicated back-to-back contractions in employment across the South West private sector . That said , unchanged since March , the pace of reduction was only slight . Where job shedding was reported , survey participants indicated costcutting measures , layoffs and the non-replacement of retirees . The fall in the local workforce compared with fractional growth at the UK level .
As has been the case on a monthly basis since March 2023 , South West firms recorded a decline in outstanding business volumes at the start of the second quarter . Having eased since March , however , the pace of depletion was modest and the second-weakest over this period . Some panellists cited a greater focus on clearing backlogs , while others suggested that new
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order growth added some pressure on capacity .
Despite slipping to a four-month low in April , the Future Activity Index was well above the neutral mark of 50.0 and its long-run average . Hence , the latest reading was indicative of robust optimism surrounding the year-ahead outlook for business activity .
Confidence was underpinned by new client wins , more positive economic conditions , advertising and upbeat forecasts for demand . The overall level of positive sentiment among local firms was slightly below the UK average , however .
Paul Edwards , Chair of the NatWest South West Regional Board , said , “ The latest PMI numbers for the South West look very positive , as private sector companies reported a marked rise in inflows of new business thanks to an improvement in economic conditions and client confidence .
“ On the whole , local firms remained strongly optimistic about the outlook , though cost considerations continued to lead to job shedding . Survey data also indicated the continuation of robust cost pressures in April . Anecdotal evidence showed upward pressure on salaries and wages as the main factor driving up business costs , but competitive pressures restricted charge inflation .”
View the full report at tbebathandsomerset . co . uk
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South West Business Activity Index 55
50
45
Apr ‘ 24
51.3 Mar : 51.2
Nov ‘ 23 - Apr ‘ 24
= UK
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