Businesses in the North East reported a steep rebound in activity in July, with new figures showing the strongest growth for over five years.
Conditions have improved across the North East private sector, as the loosening of lockdown measures related to the coronavirus pandemic trigger activity, the latest NatWest North East Business Activity Index shows.
The data from the closely-followed, seasonally adjusted index, which measures the month-on-month change in the combined output of the region’s manufacturing and service sectors, pointed to a sharp rise in July, with the index registering 60.4, up from 49.7 in June.
The figure represents the first rise in output since before the introduction of measures to contain the spread of Covid-19 in March and the fatest rate of expansion for more than five years, as well as above the national average.
A pick-up in manufacturing production growth was accompanied by a renewed rise in activity across the services economy.
The data also showed demand returning to businesses across the North East, with inflows of new work rebounding sharply following the downturn caused by the Covid-19 pandemic and subsequent lockdown.
The rate of growth was the fastest for six years and the second-quickest among the 12 UK regions monitored by the survey.
Underlying data showed similarly steep increases in new orders across manufacturing and services.
July saw an improvement in firms’ expectations towards future output, with sentiment converting from a record low in April to the strongest seen since March 2016. Furthermore, the degree of optimism was higher than across the UK as a whole, with hopes among firms that easing lockdown measures would lead to a sustained rise in activity, albeit from a low base in many cases.
With the Covid-19 pandemic continuing to suppress demand and activity, firms in the North East made further cutbacks to workforces during July.
The rate of decline in employment eased for the third month running to the weakest since March, yet it remained marked by historical standards.
There were decreases in payroll numbers across both the manufacturing and service sectors and – as has been the case every month since April 2015 – firms across the region reported a drop in backlogs of work during the month.
However, the respective seasonally adjusted index climbed further from its record low seen at the height of lockdown in April, to show only a marginal decline in outstanding business that was the weakest for more than three years.
Richard Topliss, chair of the NatWest North regional board, said: “The PMI data suggests that business conditions are on the mend across the North East and pressure on the private sector easing, with reports of higher output and demand broadening across the region in July as the economy continued to emerge from lockdown.
“The especially strong rate of growth in the region is encouraging, but not entirely surprising given the situation we’ve come from in previous months. Indeed, the mounting job losses are a reminder that, while starting to improve, business conditions are still far from ‘normal’.”
