Latest regional PMI data from NatWest shows the devastating effect of the coronavirus epidemic and subsequent shutdown on North West firms. Tony McDonough reports
Business activity across the North West picked up in May but remains at a severely depressed level, leading to more people losing their jobs.
According the latest regional PMI data from NatWest, the coronavirus epidemic and subsequent shutdown was continuing to have a devastating effect on most businesses sectors in the region.
At 33 in May, the headline NatWest North West 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 – remained well below the neutral 50 mark.
This places it firmly in contraction territory despite the reading being an improvement from April’s record low of 19.7. The improvement was due to the loosening of lockdown restrictions and was above the all-UK figure of 30.
Following record job losses in April, employment across the North West was down sharply again in May as local firms looked to trim excess staffing capacity. There was retrenchment in both manufacturing and services, with the latter recording the steeper decline.
As has been the case in each of the past three months, however, the North West recorded the slowest contraction in employment of the 12 regions monitored by the survey.
Business closures and COVID-19-related uncertainty continued to weigh heavily on demand for goods and services across the North West during May. New business fell sharply and at a rate second only to April’s survey record, led once again by a steep drop in service sector orders.
By sector, the decline in activity continued to be led by the service sector. However, both here and in manufacturing, the rate of decline in output has eased since April.
And the data showed a sustained rebound in business confidence across the North West private sector during May. After falling to a series record low in March, the Future Activity Index ticked up for the second month running, pointing to growing optimism towards the year-ahead outlook.
Still, expectations remained muted by historical standards and well below the levels seen prior to the virus outbreak, with surveyed firms highlighting concerns about the pandemic’s longer-term impact on demand.
Richard Topliss, chair of NatWest North regional board, said: “Though the uptick in the PMI in May is somewhat good news and an early sign of the impact of looser restrictions, North West business activity is still being severely constrained and a slow recovery to pre-crisis levels lies ahead.
“The immediate need to cut costs and address excess capacity has led to further job losses during the month. However, thanks in part to a sustained rebound in business confidence, the North West has – once again – fared better than any other region on the employment front.”