Promising signs for northern economy in NatWest PMI data
Our Chief Economist Andrew McPhillips shares his analysis of the latest NatWest Purchasing Managers’ Index (PMI) surveys for the UK regions.
The PMI Business Activity Index is a fact-based indicator of regional economic health published by NatWest each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.
The NatWest Regional PMI data for February showed growth across all regions of the UK. This was particularly good news for the North East where a contraction in activity had been reported in each month between November and January.
Yorkshire and the Humber reported the fastest rate of expansion in February and was the second most optimistic region about the outlook for the next 12 months, behind London.
All regions reported expectations of growth over the next year though the North East was the least optimistic.
All areas also reported increases in employment and unsurprisingly businesses in all areas reported increased prices in their inputs and the prices they charged.
Northern regions, in particular, showed promising signs of recovery:
- In Yorkshire and the Humber the rate of job creation reached a record high since this data was first collected over 25 years ago.
- In the North East average prices charged by businesses rose for the 18th month in a row and in February reached the highest rate ever recorded.
- Though no records were recorded in the North West in February, new business in the region grew at its fastest rate for seven months.
The outlook is generally positive overall with activity continuing to grow and employment increasing across all regions.
However, it’s not all good news. Price inflation will continue to impact household finances in the coming months, with the Bank of England forecasting inflation to peak at around 8% next month, due primarily to energy prices.
Next Wednesday the Chancellor will make his spring statement in which he will have to address concerns over rising costs faced by families and businesses. The North is already disproportionately impacted by higher levels of fuel poverty, inadequate public transport and lower wages. We also have more energy intensive businesses which are under huge pressure from rising costs. Without urgent action, regional inequalities will end up being exacerbated by the cost-of-living crisis.
Working with businesses and organisations across the North