Transcript Economy Update - South East England Councils

South East Business Development Advisory
Group/Business Link Advisory Group
South East Economy Update
April 2011
Ivan Perkovic
Head of Economic Research
Overview
• Quarterly South East Business Snapshot Survey
• GDP growth
• Prices and inflation
• Labour market
• Confidence
• The Outlook - GVA growth by Local Authority
• Key challenges ahead
Business performance deteriorates
Q1. Would you say that ,overall, your business/ organisation’s performance in the past 3 months has improved,
remained stable or got worse?
Base: All Respondents = 644 (South East England)
Compared to results
in Autumn 2010,
there has been a
statistically significant
increase (indicated
by the blue box) in
the proportion of
businesses reporting
that their
performance has got
worse (from 28% to
36%). This is now
almost twice the level
of 19% recorded a
year ago.
• Business performance broadly stable in almost half (42%) of businesses in
the South East in the three months to February 2011.
• Over one in three said it had got worse (36%) and one in five said it had
improved (22%).
• Results partially reflect the impact of the bad weather in December.
Mixed performance across the region
Net Balance
-14
+2
-2
-2
-5
-16
-17
-22
-39
• Businesses in Berkshire, have enjoyed the strongest performance overall during
the past 3 months, followed by Buckinghamshire, Oxfordshire & West Sussex.
A surprise fall in GDP in Q4, activity recovers
in early 2011
Business Activity and UK GDP
New Orders
60
-0.5
Q1
?
45
-1.0
-1.5
-2.0
UK GDP
-2.5
Source: Markit PMI 2011 and ONS 2011
II
III IV
2006
•
•
•
•
•
I
II
III IV
2007
I
II
III IV
2008
-3.0
I
II
III IV
2009
I
II
III IV
2010
I
55
55
UK
50
50
Q1
45
45
40
40
35
Mar Apr
2008
Source: Markit PMI 2011
Jul
Oct
2008
Jan
Apr
Jul
Oct
2009
Jan
Apr
Jul
Oct
35
Jan
2010
Surprise fall in GDP in Q4.
Excluding the weather effect there was no growth in Q4.
Activity bounced back in January and February in the South East.
Second-fastest growth in new business in the last ten months in February in the
region.
Weaker manufacturing activity and retail sales, but strong activity in services in
March.
RISING
PMI Output Index (quarterly average)
Q4
60
FALLING
UK PMI
50
60
GDP growth (% change, Q/Q)
0.0
I
South East
0.5
55
40
65
50 = no change
South East PMI
35
65
1.0
Inflationary pressures continue to build
Prices (South East)
76
76
UK Inflation
6
6
RPI
recession
72
5
5
68
68
4
4
64
3
64
60
Q1 3
CPI
Q1
RISING
input prices
60
56
56
1
1
52
52
0
0
48
-1
2
2
FALLING
BoE Target
48
charges
Source: Markit PMI 2011
44
Mar
May
Aug
2008
•
•
•
•
Nov
Feb
-1
Source: ONS 2011
May
Aug
2009
Nov
Feb
May
Aug
2010
44
Nov Feb
2011
-2
Mar
2008
May
Aug
Nov
2008
Feb
May
Aug
Nov
2009
Feb
May
Aug
-2
Nov Feb
2010
Manufacturers and retailers continued to record much steeper increases in
average input prices in the South East.
Sharper than expected increase in UK inflation – VAT, transport fares,
commodities, duties.
Temporary effect as CPI (exc. indirect taxes) and Core Inflation relatively low?
The base rate going up – GDP Q1 preliminary estimates in late April, BoE
Inflation Report in May.
% change on a year earlier
72
Labour Market – so far so good?
Employment - South East England
2009
2010
2008
4.24
260
thousand
280
4.22
4.20
220
200
4.16
180
-J
an
Fe
bAp
r
M
ay
-J
ul
y
Au
gO
ct
N
ov
-J
an
Fe
bAp
r
M
ay
-J
ul
y
Au
gO
ct
N
ov
-J
an
Fe
bAp
r
M
ay
-J
ul
y
Au
gO
ct
N
ov
-J
an
ov
•
•
•
•
•
Source: ONS 2011
160
N
ov
Source: ONS 2011
2010
240
4.18
4.14
2009
-J
an
Fe
bAp
r
M
ay
-J
ul
y
Au
gO
ct
N
ov
-J
an
Fe
bAp
r
M
ay
-J
ul
y
Au
gO
ct
N
ov
-J
an
Fe
bAp
r
M
ay
-J
ul
y
Au
gO
ct
N
ov
-J
an
2008
Unemployment - South East England
300
4.26
N
million
4.28
Public sector employment in the South East falls by 12,000 in 2010.
Total employment up (+21,000 on Q,+49,000 on the year).
Employment in the South East is still some 70,000 lower than at its peak.
Gradual increase in unemployment in the region .
282,000 ILO unemployed, up 12,000 on the year.
Falling claimant count unemployment
Monthly change in unemployment
South East England
Claimant Count Unemployment
South East England
350,000
20,000
16,000
300,000
12,000
250,000
8,000
200,000
4,000
0
150,000
July 1997
-4,000
100,000
-8,000
Source: ONS 2011
50,000
1990
•
•
•
•
1993
1996
1999
Source: ONS 2011
-12,000
2002
2005
2008
2011
1990
1993
1996
1999
Claimant count unemployment well below the 1990’s peak.
Unlike in the 1990’s it started falling with the recovery of GDP.
Some 31,000 lower than at the end of the 2008/9 recession.
Significant disparities across the South East.
2002
2005
2008
2011
Claimant count falls across the region
Claimant Count Unemployment rate (%) – Feb 2011
•
•
•
•
Change in Claimant Count Unemployment
Percentage point, Feb 2010 - Feb 2011
Higher unemployment along the coast, in eastern local authorities and larger
towns and cities.
Claimant count unemployment falls across the region.
Greater falls in several largely coastal local authorities and E. Sussex than
elsewhere.
Above the average unemployment and below the average decline in
unemployment in Kent.
Redundancy notifications and the potential
impact of the public sector cuts
Redundancy notifications by sub-region, volume
and sector, March 2011
Potential effect of public sector cuts on total
employment, by Local Authority (District/Unitary)
B. Total Effect (low-high employment multiplier)
% of total employee jobs
Buckinghamshire
Berkshire
low
high
Surrey
West Sussex
SOUTH EAST
Oxfordshire
Hampshire
East Sussex
Kent
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
Source: SEEDA 2010 estimate (national estimate constrained to OBR November 2010 forecast)
•
•
•
Increase in redundancy notifications – public sector accounts for 44% (March 2011).
Significant cuts across the public sector from April 2011 – leads to the increase in
redundancy notifications and unemployment.
Greater potential effect along the coast and in (largely) eastern Local Authorities.
Business confidence improves
Q3. Over the next 3 months, do you expect the business climate in which your business/ organisation
operates to improve, remain stable or generally get worse?
Compared to results
in Winter/ Spring
2010, there has been
a significant fall in the
proportion of
businesses expecting
the business climate
they operate in to get
worse (from 32% to
23%), suggesting that
perhaps the bottom
of the downturn has
been reached in early
2011.
• Expectations of the business climate in the next 3 months are mixed – 45% expect
the business climate to remain stable.
• Compared to Autumn survey there has been an improvement in confidence.
Business Trends - next 3 months
Net Balance
+9
+2
-2
+15
+6
+12
+3
+3
• Business expectations regarding domestic orders and the volume of output more
positive over the next 3 months.
• There is also more optimism regarding profit margins and cash flow.
A sharp fall in consumer confidence
Business Confidence
40
40
recession
30
UK
30
20
Q1
10
20
10
South East
0
-10
-20
-20
-30
-30
-40
-40
Source: ICAEW 2011
-50
-50
II
III IV
2006
•
•
•
•
I
II
III IV
2007
I
II
III IV
2008
I
II
III IV
2009
I
II
III IV
2010
120
recession
110
I
110
100
Q1
90
UK Index
0
-10
I
Consumer Confidence Index
120
100
90
80
80
70
70
60
60
50
50
40
40
Source: Nationwide 2011
30
30
2004
2006
2008
2010
A small recovery in business confidence in March (ICAEW).
Dip in confidence (BCC, Markit/CIMPS Manufacturing PMI), but strong service PMI.
Steep deterioration in household finances in March (Markit HFI).
Nationwide Consumer Confidence Index at its lowest level in the survey’s history in
March.
The Outlook for 2011
UK GDP growth, 2011 (% p.a.)
4
A
C
B
max
3
OBR (June-10)
3.6
GVA growth by Local Authority, 2011
% p.a.
county average
3.2
2.8
OBR (Nov-10)
2
1
consensus
forecast
OBR (March-11)
min
0
2.4
2.0
S. East average
1.6
UK average
1.2
-1
Source: Experian, Autumn 2010
0.8
-2
Source: OBR 2011 and HMT 2011
September 2010
January 2011
March 2011
Berkshire
Kent
Buckinghamshire
'
Oxfordshire
E. Sussex
Surrey
Hampshire
W. Sussex
• Slower GDP growth over short term but slightly faster thereafter (OBR).
• Economy to re-balance – strong contribution to growth from trade and business
investment (OBR).
• South East to outstrip UK and most other regions, but not London and the East
(Experian).
• Significant disparities in GVA growth within South East counties (Experian).
Key challenges ahead
• Fiscal tightening and its impact on consumption
• Weaker demand for exports
• Lending still constrained
• Business investment fails to materialise
• Inflation and tighter monetary policy
• Housing market re-adjustment / the credit crunch v2.0
Thank you
SEEDA Research & Economics
Email: [email protected]
www:
http://www.seeda.co.uk/what-we-do/economic-intelligence-and-research