Jobs hope for region as economic decline starts to bottom out

Bottles of vinegar on the production line at the Aspall factory near Debenham

New orders are declining - but only marginally, an East of England NatWest PMI report has found - Credit: RACHEL EDGE

The East of England economy appears to be stabilising — although it’s still in decline, new figures suggest.

And rising costs are squeezing companies as transport bottlenecks, material shortages and higher freight costs put up prices, a monthly NatWest survey has found.

Its East of England Purchasing Managers’ Index (PMI) Business Activity Index revealed a fractional decline in new orders — but workforce numbers expanding.

Regional companies’ expectations were as high as they were back in May 2016, it found.

The seasonally-adjusted index measures the month-on-month change in the combined output of the region’s manufacturing and service sectors on a scale of 0 to 100. Below 50 represents a decline and above 50 a rise.

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It showed new orders still in month-on-month decline at 49.0 in February but higher than they were in January when the index stood at 43.5 in January. Those still in decline cited coronavirus restrictions and weak demand.

But for some firms — mainly manufacturers — who did report more orders the rate of contraction was considerably lower than in January. 

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Private sector firms remained confident that their output would grow over the next 12 months with the easing of restrictions, greater demand and expansion plans all buoying sentiment. 

As a result, optimism in the east climbed to its strongest in almost five years — although it was slightly below the national average.

Private sector firms in the east recorded a marginal expansion in staffing levels in February — which contrasted with a marked decline at the start of the year. It was one of only three regions not to see a decline in jobs, alongside the East Midlands and Yorkshire & Humber.

But difficulty in obtaining inputs and insufficient workforce numbers led to the rise in outstanding business across the region — while all the other 11 regions saw a fall.

John Maude, of NatWest Midlands and East Regional Board, said despite the overall decline in activity and problems with rising costs, there were some positive signs.

“Private sector activity in the East of England declined again in February with Covid-19 lockdown restrictions persisting during the month.

"That said, the latest fall was only marginal with rates of reduction in business activity and new orders easing notably from those seen in January,” he said. 

“The real cause for concern comes from sharper price pressures faced by companies.

"Transportation bottlenecks, higher freight costs, and material shortages all helped accelerate the rate of input price inflation, which was robust and at a 32-month high.

“On a more positive note, firms’ expectations were boosted by the so far successful vaccination programme which added to hopes of a return to normality over the course of the year.

"Moreover, the government roadmap for easing restrictions suggests that firms could see strong improvements in the demand environment in the second quarter. 

“It seems some firms are already gearing up for better times ahead, with employment rising for only the second time in the past year.”

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