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North East end its year-long run of growth, study shows

The latest Lloyds Bank Regional Purchasing Managers’ Index (PMI) has reported a fall in North East business activity for the first time in a year.

The Lloyds Bank PMI, or purchasing managers’ index, is essentially an economic health-check of UK regions, comparatively based on responses from manufacturers and service providers about the volume of goods and services produced.

The North East findings are based on a range of questions posed to businesses across Northumberland, County Durham, Tyne and Wear and the Tees Valley.

The PMI reading dropped to 48.6 in July from June’s 50.6, moving the region below the 50.0 mark that separates business activity growth from contraction for the first time in a year.

The North East was the only region of the UK to record a reduction in business activity in July.

Companies also reported a drop in new orders and employment. Job losses reflected a lack of demand, which caused businesses to operate below their maximum production capacity.

Meanwhile, the survey’s indicator of business confidence – which tracks expectations for output in the year ahead ­– dropped to its lowest level in eight months.

The survey also showed that businesses faced another steep increase in costs, linked largely to the recent weakness in the pound.

However, businesses were reluctant to pass on the cost increase to their customers, with prices charged for goods and services rising modestly and at a slower rate than the UK average.

Leigh Taylor, regional director for the North East at Lloyds Bank Commercial Banking, said: “It’s disappointing to see the North East end its year-long run of growth in July, with business activity falling due to a drop in demand for goods and services.

“The region also didn’t fare well on employment, recording the only drop in private sector workforce numbers in the UK.

“The second half of 2017 is shaping up to be a challenging period for the region, but we’re hopeful local firms’ competitive pricing strategies will help bring business activity back to growth in the months to come.”

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