August data from the NatWest Yorkshire & Humber PMI® indicated that the region achieved its strongest expansion of private sector output since last autumn.
Faster economic growth was supported by rising new business volumes and a robust upturn in staffing levels.
Strong input cost inflation remained a key area of concern for businesses in the region, reflecting rising prices for imported goods, higher fuel bills and greater staff salaries.
The headline NatWest Yorkshire & Humber Business Activity Index is a seasonally adjusted index that measures month-on-month changes in the combined output of the region’s manufacturing and service sectors. At 56.1 in August, the index picked up from 55.0 in July and remained well above the 50.0 no-change mark.
The latest rise in Yorkshire & Humber private sector output was the strongest since October 2017 and the joint-fastest of all UK regions. Manufacturers experienced a particularly strong increase in production, with firms in the region citing successful efforts to expand sales in the US and across Asian emerging markets.
Yorkshire & Humber businesses recorded their largest increase in new work since February. The latest improvement in order books was the strongest of all 12 UK regions. Survey respondents cited resilient client demand and a number of manufacturers commented on a boost to export sales from the weak pound.
Backlogs of work declined slightly in August, thereby indicating that capacity pressures moderated across the Yorkshire & Humber private sector economy. Anecdotal evidence suggested that long-term business investment plans and additional staff recruitment had helped to boost operating capacity in August. The latest increase in payrolls was the largest since November 2017 and the strongest of all 12 UK regions.
Higher input costs have been recorded by Yorkshire & Humber firms for almost two-and-a-half years, which is the longest sustained period since 2008. The rate of input price inflation eased to a three-month low in August, but remained stronger than its long-run average.
Survey respondents cited rising fuel bills, higher salary payments to retain skilled staff and the weak pound. Meanwhile, average prices charged by Yorkshire & Humber firms increased at a robust pace, reflecting the need to pass on higher operating expenses to clients.
Business confidence moderated in August and dropped below the trend seen so far in 2018. However, the region remains far more upbeat than elsewhere in the UK. Survey respondents partly linked their optimism to opportunities in new export markets.
Richard Topliss, chair, NatWest North Regional Board, said: “Yorkshire & Humber was the leading part of the UK for economic growth and private sector job creation in August, according to the latest NatWest PMI surveys. A strong appetite for business investment spending and success in new export markets has helped the region to cement its place as a star performer so far this year.
“Improving order books underpinned efforts to boost business capacity in August. Yorkshire & Humber firms remain far more upbeat about the year-ahead outlook than elsewhere in the UK.
“Stretched supply chains were reported as a potential headwind to growth by manufacturers in the region. Survey respondents also cited concern at recent polticial uncertainty, although a sizeable number remained sanguine about managing Brexit-related disruption at their own businesses.
“It’s encouraging to see that Yorkshire & Humber companies saw a moredation in their cost pressures during August. However, higher oil-related prices and the recent weakness of sterling will likely contribute to additional input cost rises for businesses in the coming months.”