Optimism amid private sector lockdown gloom
The North East private sector remained in a deep downturn last month – but more firms say they are optimistic for the coming year.
The monthly NatWest North East Business Activity Index for May, which is published today, found that:
*Business activity was still in decline, but pace of contraction eases *Employment fell sharply again as firms looked to cut excess capacity
*Output expectations have rebounded from April's record low
The index – a seasonally adjusted measure of monthon-month change in the combined output of the region’s manufacturing and service sectors – recorded 28.9 which is well below the 50.0 threshold that separates growth from contraction.
But the latest reading was an improvement from April's record low 10.7 as the easing of lockdown measures saw more firms resume operations.
The decline in activity in the region continued to be led by the service sector.
For first time in three months, firms in the region reported optimism towards the outlook for activity over the coming year.
The Future Activity Index climbed sharply from a record low in April and pointed to a higher degree of business confidence than that seen across the UK as a whole.
O of the firms expecting growth in activity, however, many reported having been closed or operating below capacity in recent months.
Richard Topliss, chairman of the NatWest North Regional Board, said: “With many businesses closed for much of the month and demand severely restricted both domestically and abroad, the North East private sector – like the rest of the UK – was still firmly in a downturn in May.
“A sharp rebound in output expectations is somewhat good news as it shows firms are starting to gear up for a recovery and will likely mean fewer job losses in the coming months."
After a record fall in April, new business at firms in the North East was down again in May but the seasonally adjusted index pointed to a much slower rate of decline – although still historically low, just above the figures during the financial crisis of 2008/9.