Input cost inflation drops to 37-month low – London Business News | Londonlovesbusiness.com

London businesses registered another rise in output midway through the second quarter of 2024, albeit with the rate of growth losing some momentum.

The headline NatWest London PMI® 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 – came in at 54.2 in May, from 57.4 in April, indicating a solid, but softer expansion in activity levels across the capital.

The rate of growth was the slowest recorded in seven months.

The level of new business placed at private sector firms in the capital rose in May, as has been the case in 16 of the past 17 months. Increased new order intakes reflected demand strength, new product releases, marketing and greater real estate activity, according to panel member reports. Although solid, the rate of growth nonetheless softened to the weakest since last September.

The year-ahead outlook for business activity remained stronger than the long-run trend during May, and even ticked higher from the previous survey period. Over 53% of businesses expect output to grow, whereas just 7% foresee a downturn. New products, contract wins, investment, export sales and technological improvements were some of the reasons given by companies for their growth forecasts.

May data signalled a marked softening in cost pressures faced by London private sector companies. Although input prices continued to rise sharply overall, the rate of inflation slowed substantially to its weakest in just over three years. Salary and IT costs were most often reported as up in price over the latest survey period.

Catherine van Weenen, Territory Head of Commercial Mid Market at NatWest, said, “London-based businesses registered further activity growth during May, as demand conditions remained strong. The upturn showed signs of losing some momentum as new work intakes grew at the weakest rate in eight months, despite positive effects from marketing drives and new products.

“On the upside, the latest data provided evidence that April’s uptick in inflationary pressures was short-lived. Input cost inflation fell to its lowest level in just over three years, leading to a similar slowdown in the rate of output price inflation.

“This will hopefully encourage firms and policymakers alike that inflation is still on a decelerating path, however slow the transition back to normal levels will take.”