Private sector output among North East business has fallen for the first time since January, a new survey suggests.
The latest NatWest North East PMI Business Activity Index – which measures month-on-month changes in the combined output of the region’s manufacturing and service sectors - showed a fall from 51.0 in May to 48.3 last month. It means the North East was one of only four UK regions to experience a contraction, alongside Wales, the East Midlands and the South West.
Meanwhile, new business fell at its steepest rate since last October, and for a second successive monthly decline. This came in contrast to the rest of the UK where new business rates increased, albeit at a slower rate.
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Despite the downward trend, regional firms reported some optimism about output growth over the next 12m months, though that confidence was the weakest since February. And the North East presented the weakest expectation of all 12 UK regions in June.
There was evidence of rebounding jobs growth, with the seasonally adjusted Employment Index rising to signal the fastest rate of job creation since last February. The North East, while below the UK average growth rate, climbed from 12th to joint seventh in the rankings. Those findings come as the region was identified in separate research, published this week, as having the lowest average wages in the country.
Together, the drop in new work and rise in employment meant North East firms experienced the fastest drop in outstanding work in 10 months. Backlogs among companies have declined continuously since January 2022, the longest sequence of all 12 UK regions.
Cost pressures were shown to be consistent in the month, driven by wages, non-energy utilities, office supplies and consultants. Though firms reported lower prices for energy, materials and fuel leading to the lowest inflation rate since November 2020. Prices of goods and services were raised to pass on costs to customers.
Malcolm Buchanan, chair of the NatWest North Regional Board, said: "The North East's private sector economy stuttered in June as new business fell at a steeper rate, dragging overall activity down for the first time since the start of the year. The New Business Index was broadly in line with its 2022 trend level, and the absence of new sales hit sentiment during the month. The main positive finding was a renewed rise in employment as some firms reported filling long-standing vacancies.
"Both price indices continued to move in the right direction, but inflationary pressures remained elevated and have yet to drop to levels that will spur demand. Wage pressures and non-energy utilities were reported as inflationary factors during the month."
