A fresh rise in demand for Yorkshire & Humber goods and services, as well as a jump in business confidence, provided a robust forward-looking signal for local business conditions in October.

The headline Yorkshire & Humber 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 sharply from 45.2 in September to 49.4 in October.

Albeit still below the 50.0 no-change mark that separates growth from contraction, the figure pointed to a reduction that was only marginal overall and considerably slower than that seen previously, hinting at some underlying improvement in conditions.

Notably, new orders placed with local private sector companies rose for the first time since March.

Malcolm Buchanan, Chair of the NatWest Regional Board, said: "October presented a positive outlook for the local economy in Yorkshire & Humber. A renewed rise in demand for goods and services – the first since March – bodes well for activity in the near-term. In fact, firms are looking ahead to the next 12 months with increased optimism. Growth expectations were their strongest in eight months, with many local business leaders pointing to expansion strategies as a reason to be upbeat.

"It also appears that businesses have adapted to recent economic challenges by improving their operating efficiency. This has helped slow the decline in private sector employment. Should the upturn in sales continue, this could even drive growth in local payroll numbers.

"The downward path of cost inflation is also a welcome development for local firms. Positively, firms appear more bullish on their pricing power, with average prices charged rising at a quicker rate than in September."

Performance in relation to UK

Private sector companies in Yorkshire & Humber grew more optimistic towards the year-ahead outlook for business activity in October. In fact, expectations were their most upbeat since February. Positive sentiment reflected strategic plans from panellists such as acquisitions, new product developments and capacity expansions. Some companies also reported strong sales pipelines.

That said, the local level of business confidence was below that seen for the UK as a whole.

As for current demand conditions, October survey data signalled a fresh increase in sales volumes. This represented a notable improvement when compared with the year-to-date trend of decline. Overall intakes of new business rose for the first time since March, albeit marginally.

Yorkshire & Humber was just one of six monitored UK areas to see demand growth.

Although there was a further reduction in employment numbers across the Yorkshire & Humber private sector at the start of the fourth quarter, the decrease was only mild and the slowest seen across the current 11-month period of job losses.

The drop in workforce numbers was curtailed amid reports of companies hiring more staff in anticipation of better conditions. Where staffing capacity fell, there were mentions of the non-replacement of leavers and redundancies.

Despite a continued shrinkage of workforces across the region, the latest data highlighted a further reduction in outstanding business volumes. The rate of backlog depletion was marked and the second-quickest seen across the 12 monitored parts of the UK, surpassed only by Wales.

Private sector companies in Yorkshire & Humber saw another month of steeply rising operating expenses, according to the latest survey data. Wage pressures were cited by respondents, while others reported increases in commodity prices, such as minerals, and food costs. That said, the rate of inflation slowed to a ten-month low.

Local businesses were slightly more aggressive with their own price setting during October, as evidenced by a faster increase in average goods and services charges. The rate of inflation across the region was in line with the national trend.