NORTH East firms reported a renewed rise in business activity during February.

The NatWest North East Business Activity Index — a seasonally adjusted index that measures the month-on-month change in the combined output of the region's manufacturing and service sectors — showed the fastest expansion in activity since last July.

The bad news is that the rate of growth was considerably softer than that seen for the UK as a whole and the weakest of the 12 monitored UK regions.

Read more: Rhiannon appointed to key role at Chamber of Commerce

Richard Topliss, Chairman of North Regional Board, commented: "North East private sector activity showed a return to expansion territory in February, with output rising for the first time since last October. The rate of growth was modest, yet the sharpest recorded for seven months. Firms noted that stronger inflows of new business contributed to the rise in business activity, while the renewed improvement in business conditions encouraged firms to increase staffing levels to the greatest extent for three months.

"However, a stronger recovery in demand conditions was held back by increasing price pressures in the North East. Firms widely noted further surges in energy, fuel and labour costs in February which pushed average cost burdens to the highest since last November's series record. As a result, local businesses raised output charges to the greatest extent seen in the survey history."

Latest data signalled a renewed rise in new business received by firms in the North East private sector. New order inflows have increased in 11 of the past 12 months, with the latest expansion the quickest since August last year.

Where demand rose, panel members commented on greater confidence amid a further easing of COVID-19 restrictions, though material shortages and rises in infection rates internationally held back a stronger recovery.

Employment levels among North East private sector firms rose further midway through the first quarter. Anecdotal evidence pointed to higher operating requirements amid skills shortages and higher demand. The rate of job creation was the quickest seen for three months, yet the second-slowest of the monitored regions (ahead of Northern Ireland).

Despite a renewed rise in new orders, North East firms saw outstanding business volumes decrease for the second successive month in February. The rate of backlog depletion was solid, though softened from January.

The North East was the only monitored UK region to signal a reduction in outstanding business, as was the case in the prior survey period.

February data signalled that private sector firms operating in the North East face a rapid rise in average input prices and the rate of inflation quickened for the second month running to the fastest since last November's series record.

Panellists widely attributed this to steep rises in wages, fuel and energy costs. The increase in cost burdens in the North East was the quickest of the 12 monitored regions.

Average prices charged for goods and services in the North East rose for the eighteenth month in a row in the latest survey period. The uptick was rapid and the fastest recorded in the history of the survey. Local businesses often linked the rise in prices charged to the partial pass-through of greater cost burdens to customers. The rate of charge inflation was above that seen at the UK level.

Private sector businesses based in the North East were also strongly optimistic regarding the year-ahead outlook for output in February.

 

Keep up to date with all the latest news on our website, or follow us on Facebook, Twitter and Instagram.

You can also follow our dedicated County Durham Facebook page for all the latest in the area by clicking here.

For all the top news updates from right across the region straight to your inbox, sign up to our newsletter here.

Have you got a story for us? Contact our newsdesk on newsdesk@nne.co.uk or contact 01325 505054