North East activity hits eighth month of decline
NORTH East business activity has hit an eighth successive month of decline and is the weakest region in the UK, according to an influential survey.
The NatWest North East PMI Business Activity Index, which measures month-on-month change in the output of the region’s manufacturing and service sectors, rose from 44.5 in December to 47.3 in January, but remained below the 50.0 that signals economic growth.
New work placed with North East private sector firms decreased again in January, with companies saying the general economic climate was to blame. Private sector firms across the North East reduced staffing levels in January, a seventh consecutive month of job cuts, though the survey’s Future Activity Index remained well above the neutral 50.0 level, signalling sustained confidence in the outlook for the North East economy.
Operating expenses faced by North East firms increased last month, driven in part by increased raw material prices and freight costs. Prices charged by local companies also rose.
Malcolm Buchanan, chair of the NatWest North Regional Board, said: “North East firms faced ongoing difficulties at the start of the year. Considering the 12 monitored areas of the UK, the comparative performance of the North East was generally weak, but nevertheless companies indicated some improvements in January.
“Both activity and new business declined moderately, and at the slowest rates in five and eight months respectively. Companies responded to subdued demand conditions by cutting employment levels in January, but only marginally. As a result, the level of outstanding work decreased at the softest rate in eight months. Meanwhile, with downturns decelerating, firms’ confidence toward the outlook picked up in January. Finally, inflationary pressures continued to trouble firms across the region, with both cost and charge inflation accelerating in January.”
The NatWest survey comes ahead of the publication this week of key data on unemployment and inflation.
Despite signs of improvements in the general economic climate, a report from the The Organisation for Economic Co-operation and Development (OECD) last week said that Britain is set for the highest inflation of the world’s G7 advanced economies this year and next.
Last week also saw revisions from the Office for National Statistics (ONS) suggesting that Britain’s rate of unemployment was lower than first thought in the three months to November, but that the rate of inactivity was higher.