Southwest economy slows as Omicron variant hits spending

The Southwestern economy is experiencing an Omicron-induced slowdown, with consumers reluctant to spend and prices rising, a new report reveals.

The latest regional PMI data from NatWest revealed that growth in trade activity in the region fell to a nine-month low in December, with slower growth in output and new business and inflation nearing one. record, but with job growth.

The report says a number of companies have linked the slowdown to the emergence of the Omicron variant and increased customer reluctance to spend.

At the same time, efforts to support business expansion plans led to the fastest rise in employment in four months, leading to a more moderate increase in backlogs.

Price data showed that the rate of input cost inflation slowed from November’s all-time high, but remained fast, as companies continued to raise prices.

The NatWest South West Business Activity Index – a seasonally adjusted index that measures the monthly change in the combined output of the region’s manufacturing and service sectors – fell from 54.6 in November to 52.3 in December, signaling a modest increase to come out. This is notably the weakest rate of expansion in nine months, with growth also slower than the UK-wide trend.

Private sector companies based in the Southwest saw a further increase in their total sales in December, stretching the current expansion streak to 10 months. Although strong and faster than the long-term average, the growth rate slowed significantly over the month and was the slowest recorded since September. New business grew at an equally strong, albeit slower, pace across the UK.

Companies often mentioned that improving customer demand and new product lines spurred new work. However, a number of companies have indicated that the Omicron virus variant has weighed on customer spending and tourism.

Although the Future Activity Index remained above the neutral level of 50.0 and continued to signal robust optimism about the outlook for activity for the coming year, the overall level of optimism has declined. for the fourth consecutive month.

Notably, the level of positive sentiment was the lowest since January 2021. Uncertainty over the pandemic and supplier shortages were key factors weighing on business confidence.

Data from the December survey signaled a further increase in private sector employment in the South West at the end of the year. Notably, the job creation rate was the highest in four months and slightly faster than the UK-wide trend.

Where higher staffing levels were reported, this was generally attributed to efforts to increase capacity and forecasts of increased sales in the coming months.

The seasonally adjusted Exceptional Enterprises Index reported a ninth consecutive monthly increase in unfinished work at private sector firms in the Southwest in December. The rate of accumulation has been solid, despite a slowdown from November, and faster than that seen across the UK private sector as a whole.

Reports from panel members suggested that shortages of inputs and staff had an impact on how quickly companies could process and make sales.

Average input prices facing private sector firms in the Southwest rose for the 19th consecutive month in December. Although down from November’s record, the inflation rate remained rapid and among the highest in survey history.

The rate of increase also remained higher than that observed at the national level. Higher financial charges were often linked to higher costs for raw materials, transport, fuel and personnel.

Business Live’s Southwestern business reporter is William Telford. William has over a decade of experience reporting on the business scene in Plymouth and the South West. It is based in Plymouth but covers the entire region.

To contact William: Email: [email protected] – Phone: 01752 293116 – Mob: 07584 594052 – Twitter: @WTelfordHerald – LinkedIn: – Facebook:

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Against a backdrop of rapidly rising costs, private sector companies in the South West increased their selling prices again at the end of 2021. The inflation rate was the lowest in three months and slower than the trend. UK scale, but remained high overall. . Firms that increased their fees attributed this to the passing-on of higher input costs to customers.

Paul Edwards, Chairman of the NatWest South West Regional Board, said: “Private sector companies in the South West saw significantly lower production resumes and new orders at the end of 2021 as the emergence of the variant. Omicron and the ensuing uncertainty held back customer spending and tourism. across the region. This impacted confidence in future production expectations, which slipped to an 11-month low. Nonetheless, it was encouraging to see companies continue their plans to expand and improve their capabilities, with employment growing at the fastest pace since August. “

Learn more about the economy of the South West

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