Output growth in most UK sectors slowed in April as rising inflation weighed on demand for goods and services.

While the UK economy as a whole continued to grow, eight of the 14 sectors monitored by the Bank of Scotland tracker saw a slower month-to-month rate of output growth, or four of more than in March.

However, the number of sectors registering an overall increase in production remained resilient, falling only month on month.

The slowdown in output growth was driven by consumers and businesses restraining spending amid concerns over inflation levels, with 11 out of 14 sectors seeing weaker demand for new orders in April – the highest number since July 2021.

Economic headwinds have led to expectations that companies will respond by focusing on building financial and operational resilience, including through strong working capital management and optimizing inventory levels.

The UK Sector Tracker is an evolution of the Bank of Scotland UK Recovery Tracker, using PMI data from S&P Global.

Companies in the services sector continued to see their overall order volumes increase month-over-month, despite the sector seeing the most marked slowdown in order growth.

Between March and April, the new orders index in the services sector fell by five and a half points to 54.9, compared to a fall of 0.1 point for the equivalent index in the manufacturing sector (51.7) . A reading above 50 on the tracker indicates bullishness, while a reading below 50 indicates contraction.

Tourism and leisure – which includes pubs, hotels, restaurants and leisure facilities – saw output grow at the second-fastest pace of all sectors monitored in April (65), behind only software and hardware. services (69.2) as businesses continue to benefit from an easing of Covid-19 travel restrictions.

However, the pace of growth in the sector slowed month-on-month, with companies reporting a drop in new business for the second consecutive month (56.6 in April compared to 63.6 in March and 64.5 in february).

Output in the transport sector – which includes airlines, carriers and rail operators – also continued to decline, falling for a fourth consecutive month (46.1 from 49.7), as new business orders contracted at their fastest pace since February 2021 (42.6).

The pace of growth in manufacturing orders in April was the weakest in 15 months. Manufacturers of metals and mining products recorded the largest month-on-month drop in production (47.6 in April compared to 64.4 in March), as companies saw a contraction in new business (49, 0 versus 58.6).

Corporate inflationary pressures rose at the fastest pace in 24 years according to underlying tracker data in April, amid a particularly sharp acceleration in costs in the manufacturing sector.

Six of the seven manufacturing sectors tracked by the tracker reported faster inflation in input costs. Businesses were 16 times more likely than the long-term average to report higher energy costs and five times more likely to report higher material costs – the highest level since October 2021.

A surge in agricultural commodity prices supported record cost inflation for food and beverage makers for a second consecutive month, registering 96.8 on the tracker’s input price index – from 94.3 in March.

Meanwhile, incidences of supplier delivery delays increased for the first time since October 2021, with delays most common among manufacturers of technology equipment (22.4) and industrial goods (28.1).

Service sector costs in April also rose by the largest extent on record as businesses grappled with rising goods prices, wage pressures and energy costs.

Tourism and recreation businesses saw the fastest rise in input prices of any service sector – registering 91.4 on the input price index – followed by transportation businesses (87.6).

Amid rising costs, companies increased what they billed customers at a record pace in April. The price charged index posted a record increase to 69.4 from 68.3 in March.

Price increases were most common among manufacturing firms, particularly auto and auto parts producers (85.9) and food and beverage producers (80.8).

Despite inflationary pressures, UK businesses continued to increase employment levels, with 13 out of 14 sectors seeing an increase in employment in April – the same proportion as in March, as businesses continued efforts to clear backlogs of staff.

Jeavon Lolay, head of economics at Lloyds Bank Commercial Banking, said: “Consumers are becoming much more conservative when it comes to spending as the cost of living rises, which has a direct impact on business output growth.

“Companies are also facing intense cost pressures, with a record share of companies reporting raising prices to maintain margins. However, it remains to be seen to what extent they can pass on more – with higher prices having already a significant knock-on effect on demand in certain sectors.

“While the strength of the UK labor market is a major boost for consumers, businesses continue to struggle to fill vacancies, posing risks of accelerating wage growth and further increases in inflation. over the coming year. ”

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