Inflation surges as demand falters across West Midlands - report

West Midlands business output rose for the sixth successive month in March, albeit at the slowest pace over this period amid a renewed decline in new business intakes, according to new research.

The West Midlands Business Activity Index, a seasonally adjusted index that measures the month-on-month change in the combined output of the region's manufacturing and service sectors, was down from 53.5 in February to 50.2 in March.

It said this signalled a marginal pace of expansion that was the weakest over the current six-month sequence of growth. Firms that signalled higher activity levels remarked on new clients wins.

The upturn was constrained by weak sales performances at some companies, subdued client confidence and challenging market conditions.

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The report said West Midlands firms noted a substantial increase in their expenses during March, with the rate of inflation accelerating to the strongest in over three years.

Anecdotal evidence showed that outlays on material and labour increased, with the war in the Middle East particularly cited as a reason behind greater energy, input and transport costs.

Subsequently, companies lifted their selling prices once again. The overall rate of charge inflation was sharp and the most pronounced since April 2023.

Lisa Phillips is the Midlands regional managing director at NatWest which produces the report.

She said: "The war in the Middle East appeared to have dented demand for West Midlands goods and services by pushing up inflationary pressures to their highest in around three years.

"Despite these challenges, March data revealed that the local economy remained resilient.

"The decline in new business was limited, output continued to grow and job losses were among the slowest in a year-and-a-half.

"While businesses are understandably concerned that the war in the Middle East could keep inflation elevated and postpone interest rate cuts, they remained optimistic about the future.

"Many firms expressed confidence in raising output over the next year and are planning to expand by launching new products, exploring new markets, investing in operations and increasing marketing budgets."