North East private sector output grows for first time in eight months – new report

North East private sector firms saw business activity grow for the first time in eight months in April, according to a new study.

The latest NatWest PMI® survey also revealed new orders were up last month – with companies reporting stronger optimism as business confidence hit a seven-month high – as the rate of job losses eased for a second straight month.

Rising for the fourth time in the past five months, the headline 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 – registered 50.3 in April, up from 48.3 in March.

This was its highest reading for almost a year, although it remained well below the historical series average of 53.0.

The marginal increase in business activity in the North East was broadly consistent with the picture for the UK as a whole, which returned to growth after briefly stagnating in March.

April’s survey, meanwhile, indicated a similarly modest rise in the level of new orders received by North East private sector firms. This followed a reduction in inflows of new work in each of the previous eight months, linked to Brexit uncertainty and a slowdown in the car industry.

Data at the sector level indicated the pick-up in demand was mainly centred on the services economy, with manufacturers noting a further reduction in order books.

Firms continued to reduce staffing capacity during April, taking the current sequence of decline in employment to ten months.

However, the rate of job shedding eased further from the sharp rate seen in February to the weakest since November last year. Backlogs of work, meanwhile, fell at the slowest pace for 17 months.

Elsewhere, latest data showed a further easing of inflationary pressures, linked in part to strong competition and attempts by businesses to win new contracts. Average prices charged for goods and services by firms in the North East rose at the slowest rate for seven months in April.

The weaker increase in selling prices was also influenced by softer cost pressures faced by businesses. Though there continued to be reports of rising wages and raw material prices, the overall rate of input price inflation was at a 23-month low.

Richard Topliss, NatWest North Regional Board chair, said: “April saw a welcome return to growth for business activity across the North East private sector economy.

“The region isn’t out of the woods yet, with April’s increase in output being only marginal, but stronger inflows of new business bode well for the immediate outlook.

“With business confidence steadily recovering, job prospects in the local economy also look likely to improve.

“Employment fell in April for the tenth time in as many months, but the rate of decline continued to ease from the strong rate seen in February.”