The NatWest South West 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 – rose only fractionally from 51.2 in June to 51.3 in July.

The latest reading signalled that output continued to expand modestly overall, and at a much weaker rate than those seen earlier in 2022.

The upturn was also softer than that seen on average across the UK as a whole.

The amount of new work received by private sector firms in the South West fell during July, thereby ending a 16-month period of expansion.

Though only marginal, the reduction contrasted with a modest increase in new work across the UK as a whole.

Lower amounts of new business were often linked by panellists to sharply rising costs and reduced market confidence amid greater economic uncertainty.

Latest survey data pointed to a notable drop in business confidence regarding the year-ahead outlook for output at South West private sector firms.

Furthermore, the level of optimism fell to the lowest seen since the series began in July 2012.

While many firms anticipate stronger customer demand and new products to support growth, there were often concerns that intense inflationary pressure, tighter financial conditions and a slowing global economy could dampen activity levels over the next 12 months.

Workforce numbers at South West private sector firms expanded for the seventeenth month running in July.

Though solid, the rate of job creation was the softest seen over this period and weaker than the UK-wide trend.

Higher employment was generally linked to the filling of vacancies and efforts to expand capacity.

However, there were some reports of difficulties finding suitable replacement staff and greater efforts to contain costs.

Private sector companies operating in the South West signalled a fresh decline in outstanding workloads during July.

Though only slight, it marked the first reduction since February 2021.

Anecdotal evidence suggested that weaker inflows of new work and sufficient capacity had enabled firms to tackle their outstanding business.

Across the UK as a whole, unfinished workloads were broadly stable after a 16-month period of accumulation.

Although South West private sector firms continued to see a sharp rise in average input costs during July, the rate of inflation softened for the second month in a row.

Notably, the rate of increase was the slowest recorded since September 2021.

The upturn was also weaker than the national trend.

Where higher input costs were reported, firms often cited greater prices for raw materials, fuel, energy and staff.

Adjusted for seasonal variation, the Prices Charged Index remained above the neutral 50.0 level to signal a sustained rise in output prices set by South West private sector businesses in July.

Though sharp and well above the series average, the rate of inflation was the softest seen in five months.

Panel members often mentioned raising their prices in order to pass through higher operating expenses to customers.

The rate of output charge inflation also softened across the UK as a whole, though it remained quicker than that seen in the South West.

Paul Edwards, Chair, NatWest South West Regional Board, said: "The latest PMI survey data for the South West highlighted an increasingly gloomy outlook for the region's private sector, with new business dropping for the first time in nearly a year-and-a-half, and business activity remaining muted.

"Furthermore, confidence regarding the year-ahead outlook for output fell to its lowest since the series began a decade ago, underscoring heightened concerns over the cost-of-living crisis, rising interest rates and a slowing global economy.

"There were some bright spots, however, as firms continued to add to their workforce numbers, and inflationary pressures showed signs of easing as both input costs and output charges rose at softer rates.

"That said, mounting headwinds around the outlook suggest that firms may cut back on capacity in the months ahead as firms juggle sharply rising costs and weakening demand."