Key Findings
- Stronger growth in Northern Ireland contrasts with slight contraction in Wales
- Employment rises in just half of the 12 nations and regions
- Prices charged increase at similar rates across the UK
Business activity rose in all but one of the UK's 12 nations and regions in September, following broad-based growth in the previous month, the latest NatWest Regional Growth Tracker showed.
The Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.
A renewed – albeit only slight – decrease in business activity in Wales in September prevented a second successive month of universal growth across the UK. Notably, rates of expansion generally eased compared to those seen in August. Northern Ireland was one of the exceptions, cementing its position at the top of the growth rankings with its fastest rise in output since May.
Comment
Sebastian Burnside, NatWest Chief Economist, commented:
"September's Growth Tracker report showed greater variation in performance across the UK's nations and regions compared to the situation in August when activity rose universally. Output still increased in almost all places, but at one end of the scale there was strong and accelerated growth in Northern Ireland and at the other end was a decline in activity in Wales.
"At the same time, we saw some divergence in labour market trends, with only half recording a rise in employment in September, down from ten in August. It was a similar picture for business confidence, which, whilst generally remaining positive, decreased in just over half of cases.
"On the other hand, price pressures were remarkably consistent across the 12 regions in September, with rates of increase in average charges for goods and services all closely clustered around the national average, helping make the UK inflation story somewhat easier for monetary policymakers to read."
Demand
There was broad-based growth in new business in September, the second month in a row in which this has been the case. The South West topped the rankings, recording a sharp and accelerated increase in new work that was the quickest for two-and-a-half years. At the other end of the spectrum, the East of England, Scotland and West Midlands each saw only marginal improvements in underlying demand.
Outlook
Trends in business expectations varied in September. Just over half of the monitored nations and regions reported a reduction in business confidence, but sentiment nevertheless remained positive across the board. Firms in the South East recorded not only the strongest overall growth expectations, but also the biggest upswing in optimism.
Employment
Employment growth in September was led by Northern Ireland, as was the case throughout the third quarter. Only half of the 12 UK nations and regions monitored reported a rise in workforce numbers, down from ten in August. Wales saw the steepest drop in staffing levels, although the decline was only modest overall.
Capacity
Alongside further solid growth in outstanding business (i.e. orders and projects awaiting completion) in Northern Ireland, latest data showed a renewed rise in the South West, the latter's first increase in over one-and-a-half years. Backlogs of work fell in all other cases. That said, rates of depletion generally eased, albeit only fractionally in Yorkshire & Humber.
Inflation
The rate at which business costs increased accelerated slightly in eight of the 12 nations and regions in September. This included the East Midlands, which recorded the highest overall rate of input price inflation and one that was just above its long-run average. The slowest rise in costs was seen in the North West, where the rate of increase was unchanged from the month before.
As was the case with costs, the East Midlands recorded the fastest overall rise in average prices charged for goods and services in September. There, the rate of output price inflation ticked up to a six-month high and was quicker than the historical trend. The gap between highest and lowest (North East) rates of inflation was the narrowest on record, however.
