Member Article

Report shows slowdown in North East growth rates for new business and output

The latest Lloyds Bank North East PMI report has found that job creation has accelerated in the region despite a slowdown in output growth.

The Lloyds Bank North East Business Activity Index, a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors, has revealed a slower, although still sharp, rate of expansion. Moreover, business activity reportedly increased at both services firms and manufacturers.

Mirroring the trend for output, incoming new business rose at a weaker pace in June that was, nonetheless, robust. Higher inflows of new work were reported by almost one-third of survey participants, with panellists commonly citing strong demand. Growth of new orders was noted in both the manufacturing and service sectors, led by the latter.

Despite the slowdown in growth rates for new business and output, private sector companies in the North East continued to raise employment in June. The latest expansion in workforce numbers was solid and among the strongest in the history of the series. Increased workloads was the main reason cited by respondents for additional hiring.

Further job creation had reportedly enabled companies to reduce unfinished business in June. Backlogs of work were depleted at a marked pace that was faster than the UK average.

Input prices in the North East rose at a weaker rate in June, amid reports of successful price negotiations with vendors. In fact, the rate of inflation was only fractional, with the respective index posting close to the no-change threshold. Increased cost burdens in the service sector were offset by a decline in manufacturing.

Following the marginal increase seen in May, prices charged by private sector firms in the North East were lowered in June. The reduction in tariffs was broad-based by sector, with decreases signalled by both service providers and goods producers.

Leigh Taylor, area director for SME Banking in the North East, Lloyds Bank Commercial Banking, said: “Output growth in the North East private sector slowed in June as new orders increased at a softer rate. Nonetheless, rates of expansion were robust in the context of historical data and firms took on extra staff at a faster pace.

“This suggests that activity is anticipated to expand further in coming months. Lower prices charged for goods and services are also likely to aid companies in securing new contracts in the short term.”

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