Optimism remains high for private sector business

Local businesses are reporting a mixed bag of results for trade, with positive news on the export and employment fronts, but a slowdown in overall output.

While growth among manufacturers and the service sector remains strong, it has eased to a three-month low due to a weak upturn in customer demand.

Export conditions are slowly improving, but overall growth in the East of England continues to lag behind the UK average.

These are the main findings of the latest NatWest East of England PMI Business Activity Index, which monitors monthly changes in output for the region’s manufacturing and service sectors. Their report is based on the latest figures for April 2022.

Private sector firms are confident of better business activity in the coming year, slightly better than the four-month low seen in March.

Anecdotally, this confidence is linked to the relaxation of Covid restrictions, supporting client demand, and hopes of an alleviation of supply chain pressures. Expectations across local companies were broadly in line with those seen at UK level.

Export conditions have also improved for the 22nd month in a row. The East of England Export Climate Index – an indicator of health for the region’s export markets – remained broadly unchanged from March, highlighting the improvements made.

Across the region’s top five export markets, France and the UK registered the sharpest increases, followed by the Netherlands. Growth in Germany eased for the second month running.

Employment in the private sector rose in April, extending the current expansion rate to 15 months. The pace of job creation slowed to a five-month low but was strong overall, in response to higher business activity. This rate was among the quickest of the 12 monitored UK regions, just behind London and Yorkshire & Humber.

Meanwhile, work backlogs rose in April, with staff shortages and delayed deliveries the most commonly cited reasons for pressures on capacity. That said the backlog showed signs of falling for the second month in a row.

Referring to the latest figures, John Maude of the NatWest regional board, said: “The East of England recorded a robust expansion in business activity during April.

“Growth remained strong overall as relaxed COVID-19 restrictions helped sustain higher levels of economic activity.

“That said, there was a clear loss in momentum as the upturn was the weakest in three months amid a slowdown in new order growth. Hiring activity also increased at a slightly slower pace in the latest survey period.

“Prices data remained a concern as steep inflationary pressures persisted. Average cost burdens soared again in April, with firms having to contend with the second fastest rate of input price inflation since data collection began in 1997.

“Output charges were subsequently raised to the greatest extent on record as firms sought to pass higher labour and material costs on to their customers. Nevertheless, business confidence improved fractionally. Firms remained hopeful of continued gains in business activity over the coming 12 months as the COVID-19 recovery continues to revive the economy.”

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