North East private sector contracted in May, says new NatWest report

The North East’s private sector contracted in May as business confidence weakened, according to a new report.

The latest NatWest PMI® survey, released today (Monday, June 10), says the sector suffered as goods and services output decreased amid subdued demand.

It also reveals employment fell for an eleventh straight month, with input costs rising at the slowest rate for two years.

The findings reflect a disappointing U-turn after April’s corresponding report showed business activity had risen for the first time in eight months.

However, the survey does emit some positivity, revealing the recent sharp squeeze on company margins is showing further signs of easing as costs rise at the slowest rate for two years.

Taking the findings into account, the report’s North East Business Activity Index, which measures changes in the combined output of the region’s manufacturing and service sectors, registered 48.9 in May.

The figure was down from April’s 50.3 and, crucially, below the 50.0 benchmark used to separate growth from contraction.

According to the survey, North East firms reported lacklustre demand for goods and services in May, with new orders broadly unchanged and business uncertainty undermining demand.

It also says regional private sector employment fell for an eleventh straight month, with job losses across manufacturing and services, amid efforts by companies to scale back operations.

However, it adds the extent of the overall decrease in workforce numbers was the least marked since November last year.

The study also reveals firms continued to pass on part of the burden of higher costs in the form of increased charges for goods and services. Output price inflation ticked up to a four-month high in May, though it remained well below that of input costs.

Richard Topliss, chair of NatWest’s North Regional Board, said: “The difficult start to the year for the North East private sector continued into May.

“Output in the region was down for the eighth time in the past nine months after an all-too-brief rise in April.

“(However), local businesses remain optimistic about the future, and it’s our aim to provide the support and guidance to help them navigate through these tricky waters.”