Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
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