Business activity in the North East has fallen for the second month in a row, according to the latest Lloyds Bank Regional Purchasing Managers’ Index® (PMI®).

The PMI reading for August stayed below the 50.0 mark that separates growth in business activity from contraction, registering 48.8 compared with July’s 48.6.

As was the case in July, the North East was also the only area of the UK to record a reduction in business activity.

Regional employment decreased for a second successive month, as firms looked to adjust staff numbers to account for a fall in demand.

Meanwhile, business costs – including raw materials and staff pay – continued to rise, causing firms to charge their customers more on average for goods and services. However, cost pressures and inflation rates for the region were low compared with the national level.

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 August 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:

“It was another disappointing month for the North East, as business activity continued to fall on the back of weak demand.

“A lack of work for local businesses continued to be felt in the labour market, with employment down for the second month in a row.

“It’s clear the second half of 2017 will be a challenging period for the region. However, cost pressures remained low in comparison with the national average in August, so we’re hopeful that firms’ competitive pricing strategies will help bring business activity back to growth in the months to come.”