The headline NatWest Wales PMI Business Activity Index, registered 52.0 in March, up from 50.7 in February, to signal a modest expansion in output across the Welsh private sector. 

The Index is a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors.

The upturn was often linked to stronger client demand and a renewed rise in new orders. Although slower than the long-run series average, the rate of growth in activity was broadly in line with that seen across the UK as a whole.

Welsh private sector firms registered a return to growth in new orders at the end of the first quarter. The rate of growth was solid overall and the fastest since May 2022. Anecdotal evidence suggested stronger client demand drove the upturn, as client activity increased. The pace of expansion was slower than the UK average, but faster than the long-run series average for Welsh firms.

March data indicated a stronger degree of confidence in the outlook for output over the coming year at Welsh private sector firms. The level of optimism rose for the fifth month running and was the highest since November 2021. Hopes of greater client demand and planned investment in expansion and product development supported greater positive sentiment, which was stronger than the UK average.

Welsh private sector firms indicated a third successive monthly decrease in workforce numbers during March. The fall in employment was strong overall, and the fastest since the beginning of 2021. Of the UK areas that registered a decline in staffing numbers, Welsh companies recorded the second-strongest decrease, with only the North East seeing a steeper fall. The non-replacement of voluntary leavers and cost-cutting initiatives drove job shedding.

The level of outstanding business at Welsh private sector firms contracted for the eleventh successive month at the end of the first quarter. The rate of decline quickened to a strong pace and was sharper than the UK average. Companies stated that they had sufficient capacity to process incoming new work. Of the monitored UK areas, Welsh firms registered the fastest fall in incomplete business.

Private sector firms in Wales recorded a marked rise in cost burdens in March. Higher wage bills and greater material costs reportedly drove inflation. That said, the pace of increase softened further, with operating expenses rising at the slowest pace since February 2021. The rate of cost inflation also eased across the UK as a whole.

Average selling prices charged by Welsh private sector firms continued to increase at a steep pace in March. Anecdotal evidence stated that higher output charges were due to the pass-through of greater costs to clients. Although marked, the pace of charge inflation slowed to the softest since April 2021. The rate of increase was slightly faster than the UK average.

Gemma Casey, NatWest Ecosystem Manager for Wales, commented:

“March data signalled a more upbeat end to the first quarter for Welsh firms. Output grew at a faster pace, as new orders returned to expansion and rose solidly amid stronger client demand. Companies were also much more confident regarding the outlook for output over the coming year, as optimism reached the highest since November 2021.

“Nonetheless, firms engaged in cost-cutting measures as spare capacity expanded. Backlogs fell at a sharper pace, leading firms to reduce their workforce numbers at the quickest rate since early-2021. This contrasted with the wider UK trend, where employment stabilised.

“Although easing, inflationary pressures remained historically elevated. Despite some reports of moderations in material prices, increased wage bills contributed to hikes in input costs, with many passing on rising cost burdens to customers.”