North East Lags Behind rest of UK

North East Lags Behind rest of Country Despite Signs of Recovery
NatWest PMI survey shows the contraction in regional economy, but at slower rates than previously. More signs of a recovery in the North East economy have come after an influential survey signalled rising confidence and stablisation in orders.

The latest PMI survey data from NatWest and IHS Markit shows further falls in output and employment in the North East, but the decreases were shallower than those seen in December, while inflows of new business were close to stabilisation. Business confidence meanwhile perked up, reaching the highest since September 2018.

The NatWest North East Business Activity Index – a seasonally adjusted index that measures changes in the combined output of the region’s manufacturing and service sectors – climbed sharply from a near seven-and-half year low of 44.8 in December to 48.2 in January.

Though readings below 50 signify contraction in the economy, the January score is the highest since reading last year July.

The North East continued to underperform relative to the UK as a whole, however, which saw business activity rise for the first time in five months and at the fastest rate since September 2018.
Richard Topliss, chair of the NatWest North Regional Board, said: “These findings provide hope the downturn in the North East private sector reached a nadir at the end of 2019.

“January’s PMI was up sharply to a six-month high on the back of a decelerating decline in the region’s output of goods and services.

“Moreover, the near stabilisation of new business at the start of the new year provides a platform on which the region can achieve growth in 2020. The North East still has some catching up to do with other areas of the UK economy, not least in terms of job creation.”

The PMI survey points to a stabilisation of new work for North East firms in the New Year. Order book volumes fell only marginally in January and at the slowest rate for eight months.

Firms in the North East maintained a preference for lower staffing capacity in January, however, and has now fallen for 19 months in a row.

But companies in the region are reporting improving expectations for activity over the next 12 months. The degree of optimism was the highest seen since September 2018, though it was the weakest among the nine English regions and Wales.

Last week, two closely-watched economic surveys pointed to upturns in improvements in key sectors following the Conservatives’ decisive election victory.

Bosses in the construction sector have seen a noticeable boost in business following the Tories’ decisive election victory, according to IHS Markit/CIPS Purchasing Managers’ Index.

And IHS Markit’s data on the manufacturing sector stabilised in January as it was buoyed by increased political stability.

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