Business activity in the North East picked up in January with firms reporting an increase in demand for goods and services, according to the latest Lloyds Bank Regional PMI ®.
Despite growth in activity, firms were less focused on recruitment due to a steep increase in average costs, including fuel and raw materials. The rate of cost inflation facing businesses also led local firms to increase their prices at the fastest rate since May 2011.
The latest PMI reading for the North East fell from 56.6 in December to 53.0 in January, with the region’s growth rate below the UK average. A figure above 50 signifies expansion in business activity, while a reading below signals contraction.
The Lloyds Bank PMI, or purchasing managers’ index, is the leading economic health-check of UK regions. It is based on responses from manufacturers and service providers about the volume of goods and services produced during January compared with a month earlier. The North East findings are based on a range of questions posed to businesses across Northumberland, County Durham, Tyne and Wear and the Tees Valley.
Leigh Taylor, regional director for the North East at Lloyds Bank Commercial Banking, said: “At the end of last year, the North East saw strong growth of business activity. But it has now fallen further behind the pace of the rest of the UK.
“Profit margins are under pressure due to increasing cost burdens, resulting in firms focusing on increasing prices for their goods and services rather than taking on new staff.”