NatWest Northern Powerhouse PMI®

The survey, produced in partnership between NatWest and IHS Markit, is based on responses from manufacturers and services companies across the regions of the Northern Powerhouse.

The NatWest Northern Powerhouse PMI® (Purchasing Managers’ Index®) reveals that private sector companies across the region remained on a growth footing this spring, with a solid expansion of business activity and improved order books in April contrasting with subdued conditions elsewhere in the UK.

Northern Powerhouse private sector output growth hit a seven-month high in April and exceeded that seen across the rest of England, Scotland, Wales and Northern Ireland.

Business Activity

The headline NatWest Northern Powerhouse Business Activity Index – a seasonally adjusted index that measures the change in the combined output of the region’s manufacturing and service sectors – posted 53.5 in April, to remain above the crucial 50.0 no-change value and continuing a run of growth that stretches back to August 2016. The latest index was up from 52.3 in March and the highest since September 2018. Any figure above 50.0 indicates expansion.

The region has exceeded the equivalent UK-wide figure in each of the past six months.

Manufacturing

A robust contribution from the manufacturing sector provided a key support to Northern Powerhouse output in April. Manufacturing output expanded at one of the fastest rates seen since 2017, although some of the uplift reflected stockpiling efforts and a temporary boost to sales from Brexit contingency plans. In March, manufacturers had reported survey-record rises in both their stocks of purchases and post-production inventories amid efforts to avoid supply chain disruption.

The underlying picture for manufacturing sales picked up in April, helped by the strongest rise in new export orders since December 2018. In addition, optimism about production growth rebounded to a 13-month high, partly driven by hopes of more clarity regarding the path to Brexit.

New orders

New order growth was still subdued relative to warehouse inventories, meaning that the unwinding of Brexit stockpiling could act as a drag on growth in the second half of 2019. Goods producers also reported concerns about weaker global trade flows as ongoing US-China trade frictions continued to cast a shadow over international supply chains.

Turning to new orders across the Northern Powerhouse economy as a whole, latest data indicated a return to growth after the soft patch seen in March. The rebound contrasted with a sustained decline in new business levels across the UK as a whole, which survey respondents linked to domestic political uncertainty and consequent delays with corporate decision-making.

Employment

Job creation at Northern Powerhouse firms was only modest in April and eased slightly since the previous month. The region still outperformed the UK as a whole, with companies linking staff hiring to long-term expansion plans and new product launches.

Cost inflation

Operating expenses have increased sharply over the past two-and-a-half years amid rising imported raw material costs and stronger pay pressures. However, the rate of cost inflation softened in April and was far below the peak seen during 2017. Lower cost inflation and competitive pressures led to the slowest rise in prices charged by Northern Powerhouse businesses since July 2016.

Business confidence

Latest data signalled a rebound in business confidence after Brexit-related concerns took their toll on optimism in March, with confidence hitting its lowest point for over six years. Business expectations across the region hit a six-month high and moved back above the UK-wide benchmark during April.