Kevin Morgan, NatWest Cymru Regional Board, gives his opinion to Business Argus about the latest NatWest PMI Wales report...

Is something is amiss in the Welsh economy? Having performed robustly in early 2018, business confidence has taken a clear turn for the worse in Q2. What explains this apparent deterioration?

Not only did business confidence drop to a 10 month low in June, led by struggling service companies, but firms have also shed labour for the first time since February 2016 according to the latest PMI survey. Indeed, Wales is the only region in the UK planning to pare its workforce.

Of concern is a marked decline in inward investment in FY17/18.

Wales secured only 57 projects, nearly a third below the same period a year ago and higher than Scotland, Northern Ireland and London.

With around 33 per cent of projects emanating from the EU, increased Brexit uncertainty may be taking its toll on the corporate sector.

Certainly companies have turned more cautious on hiring intentions, in contrast to the positive message from latest official statistics.

The unemployment rate edged down to 4.4 per cent in April, close to the national average. Rising job losses would not bode well for the struggling household sector. With consumers likely to draw in their horns, the hotel, restaurant and catering industry is set to remain in the firing line.

The prospect of a continued sluggish household sector increases the pressure on exports to fill the gap. Fortunately export optimism in Wales remains in positive territory thanks largely to continued growth in France and Germany, its key export partners. The US economy, an import destination for exporters, is also in rude health.

With Wales heavily dependent on the service sector, growth looks set to be lacklustre in Q2 2018. The silver lining is the strong current performance of exports, suggesting the Welsh economy is very much at mercy of global forces. Still, wage growth looks likely to continue lagging the UK, a disappointing outcome.

Crucially, there is a positive degree of confidence across Welsh businesses and NatWest Cymru is committed to supporting these companies so they are in the strongest position to increase their market share.