Key points:
- Private sector output contracts at slight, but quicker, rate
- Downturn in new orders and employment continues
- Input costs decrease and firms lower their tariffs
Summary:
April saw a sustained decline in new orders result in another reduction of business activity and further job shedding among private sector firms in the North East. PMI data also pointed to an increasing degree of spare capacity, as backlogs fell at a sharper pace. Meanwhile, both input costs and output charges decreased again.
Output and demand
At 49.0 in April, the seasonally adjusted headline Lloyds Bank North East Business Activity Index – an index that measures the combined output of the region’s manufacturing and service sectors – signalled a further decline in activity in the region. Despite falling from 49.5 in March to its lowest mark in over three years, the latest reading was indicative of a slight rate of contraction.
The main factor leading firms to scale down output was another decline in new business, the fifth in as many months. However, the rate of reduction was little-changed from the modest pace registered in March. At the UK level, growth of new work quickened in April.
Employment and backlogs
Amid reports of falling output requirements, private sector firms in the North East shed workers in April. Payroll numbershave now fallen for four months in a row, but the rate of job losses softened to the weakest in this sequence.
April data highlighted ongoing spare capacity among private sector companies in the North East, with backlogs of workdeclining at a sharp rate that was the fastest since the opening month of 2016. Outstanding business decreased at both goods producers and service providers.
Input and output prices
Continuing the trend that started in December 2015, input costs faced by private sector firms decreased in April. Nevertheless, the rate of reduction was only marginal and the slowest in this sequence. Falling purchasing prices at manufacturers more than offset rising cost burdens among service providers.
Average tariffs set by private sector companies in the North East decreased for the second straight month in April. The rate of discounting was, however, modest and similar to that seen in the previous month. Sub-sector data indicated that the overall drop in output prices was centred on the manufacturing economy.
Comment:
Commenting on the Lloyds Bank Commercial Banking North East PMI® survey, Leigh Taylor, regional director for SME Banking in the North East, Lloyds Bank Commercial Banking, said:
“Output levels and staffing numbers in the North East private sector were, once again, dragged down by decreases in new business in April. Moreover, the North East remained the worst performing of all monitored English regions and Wales. Input costs decreased at a slower pace, while output charges were lowered to a greater extent, suggesting that discounts were offered in attempts to secure more work in the face of a subdued demand environment.”