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									North East Quarterly Economy Update                     July 2010




                           North East
                   Quarterly Economy Update
                                                        July 2010
  Please note that publication restrictions during the
  Election period prohibited earlier releases of this
  update. We apologise for this delay.
                                                                                        An overview of economic conditions, prepared by the
                                                                                          EAU Economic Analysis Unit, ONE North East.
Dr Allan Little, Principal Economist
T: +44 (0)191 229 6536                                              Available at: http://www.onenortheast.co.uk/page/reportspublications.cfm?catId=5
                                                                    To subscribe to the ‗e-alert‘ for the latest release, email karen.hedley@onenortheast.co.uk
E: allan.little@onenortheast.co.uk



                                       Sources/notes:
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EAU Economic Analysis Unit                                                                                                                                  1
North East Quarterly Economy Update                    July 2010



Contents                 Hyperlinked navigation page

     1. Overview                                       4. People
     - Latest Economic Position Slide 3                - Vacancies Slide 12
     - Business Activity Slide 4                       - Employment Slide 13
     - Labour Market Slide 5                           - Skills Slide 14


     2. Outlook                                        5. Place
     - Economic Forecast Slide 6                       - Sub-regional Unemployment Slide 15
     - OBR Budget Outlook Slide 7                      - Housing Market Slide 16
     - New Orders Slide 8                              - Rural Economy Slide 17


     3. Business                                       6. Further Information
     - Survey Overview Slide 9                         - Links Slide 18
     - Credit Conditions Slide 10                      - Data Slide 19
     - Costs and Prices Slide 11


                                      Sources/notes:

EAU Economic Analysis Unit                                                                    2
North East Quarterly Economy Update                                     July 2010



Overview                        Latest Economic Position
The North East economy continued to emerge from recession, although
the pace of recovery across the UK has been modest and remains fragile.
UK output performance1                                                             - UK economy grew by 0.3% between January and March,
GDP at market prices: % change - latest quarter on previous quarter                according to the latest output figures. More recent indicators
                                                                                   suggest that the recovery has continued, but this has to be
   2
                                                                                   considered as fragile at this muted level of growth.
   1                                                                               - On slide 4 we compare the performance of the North East with the
                                                                                   UK on our main monthly survey, and suggest that the region
   0
       Q1     Q2          Q3   Q4   Q1    Q2          Q3      Q4        Q1
                                                                                   appears to be keeping pace with the UK rate of recovery.
  -1               2008                        2009                    2010
                                                                                   -The chart opposite shows that production industries and service
                                                                                   sectors continued to recover, but growth in the service sector
  -2
                                                                                   slowed to 0.2% as consumer spending eased back. Construction
  -3                                                                               lagged behind this trend, but there are signs that this sector began
                                                  GDP
                                                                                   to turn the corner more recently.
  -4
                                                                                   - Whilst the ‗real‘ economy has been improving, the financial
                                                  Total Production Industries
  -5                                                                               markets have demonstrated a greater degree of uncertainty over
                                                  Total Services                   the past few weeks. This has in part stemmed from an increasing
  -6
                                                                                   focus on levels of sovereign debt, particularly in Southern Europe.
                                                                                   - The challenges facing Governments around the world in rebuilding
 Key points from chart above                                                       a sustainable fiscal position serve as a reminder of the considerable
 - We‘ve had at least two quarters of recovery,                                    adjustments required to public, bank and consumer balance sheets
 following six quarters of recession                                               That restructuring this is an important part of the recovery process,
 - Production was hit harder than services but both                                but one that will weigh down on the rate of growth (see slide 6 for
 began are now growing again                                                       details of the latest Bank of England growth forecast)


                                         Sources/notes:       1. Office for National Statistics; Quarterly National Accounts
                                                              http://www.statistics.gov.uk/pdfdir/qna0310.pdf                     Click back to
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EAU Economic Analysis Unit                                    Latest prelimiinary estmate for Q1 2010                                                      3
                                                              http://www.statistics.gov.uk/pdfdir/oie0510.pdf
North East Quarterly Economy Update                                        July 2010



Overview                         Business activity
The North East PMI® signalled the continued growth of business activity and new orders
over the past quarter, although the pace of growth eased back
 North East Business Activity, Purchasing Managers Index                                                                   Business activity PMI
                                                                                                                           - North East private sector firms recorded a
      65
                                                                                                                           rise in business activity again during May,
                    North East             UK
                                                                                                                           although the PMI score dropped back.
      60
                                                                                                                           - The table of survey responses opposite
      55
                                                                                                                           shows a mixed picture, with 21% of regional
                                                                                                         Rising            firms reporting growth, 26% seeing some
      50                                                                                                                   decline, leaving over half of panellists where
                                                                                                                           activity was unchanged. This picture is
      45                                                               Recovery phase
                                                                                                         Falling           ‗seasonally adjusted‘ to arrive at an overall
                                                                                                                           expansionary score (above 50)
      40                                                                                                                   - The chart indicates that the North East
                                                                                                                           appears to be keeping pace with the UK rate
      35                                                                                                                   of improvement during 2010. Whilst the
                                                                                                                           North East score was slightly below the UK
      30                                                                                                                   average in May, this represented just the
      May-08    Aug-08    Nov-08       Feb-09      May-09     Aug-09     Nov-09    Feb-10    May-10
                                                                                                                           second month where this had been the case
                                                                                                                           since August last year.
Is the level of output or business activity at your company higher, the same or lower
this month than one month ago?                                                                                             - On slide 8 we show that this picture for
                                                                                                                           current activity has also been reflected in
  North East,   Higher           Same           Lower        Index
                                                                         Seasonally
                                                                                       UK S. Adj. Index
                                                                                                                           new orders – an encouraging leading
                                                                        Adjusted Index                                     indicator that we might expect growth to
     May
                  21%            54%            26%          47.7            53.8            56.4                          continue over the coming months.

                                                 Sources/notes:      One NorthEast and Markit Purchasing Manager Index ®
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EAU Economic Analysis Unit                                                                                                                                              4
North East Quarterly Economy Update                            July 2010



 Overview                  Labour market
Headline labour market performance has been relatively stable, but significant
improvements in recruitment could lag behind recovery in output.
Unemployment
Monthly change in the regional stock of Jobseekers Allowance claimants                     Labour Market
                                                                                           - The headline labour market measures have been fairly
                                                                                           steady, but previous recessionary experience acts as a
                                                                                           cautionary note, that sustained improvements in employment
                                                                                           and unemployment tend to lag behind the initial period
                                                                                           recovery in business activity.
                                                                                           - The number of JSA claimants in the region was just under
                                                                                           80,000. After a fall of 1,300 in May we‘ve now seen the
                                                                                           claimant count reduce in each of the last six out of the last
                                                                                           seven months.
                                                                                           - However the broader unemployment rate (Feb-Apr quarter)
                                                                                           stands at 9.3% (compared to 7.9% in the UK) and hasn‘t
                                                                                           changed greatly since last summer. This is the second
                                                                                           highest rate in the country, behind Yorkshire and Humber.
                                                                                           - The latest PMI supports this picture, posting slight
                                                                                           expansionary balances on the employment measure in each
                                                                                           of the last three months – representing the first positive
Employment                                                                                 balances for two years. As shown in the table opposite, four
Is the level of employment at your company higher, the same or lower this
                                                                                           in five respondents held employment at the same level in
month than one month ago?                                                                  May, but the number of companies making redundancies
                                                      Seasonally                           continued to fall.
                                                                  UK S. Adj.               - We focus on regional labour market performance in Section
   North      Higher   Same        Lower    Index      Adjusted
                                                                     Index                 4: People and our separate Labour Market Quarterly Update
 East, May                                              Index
                12%     81%         7%       52.4        52.6         50.4                 (available on request).


                                      Sources/notes:   Office for National Statistics; Labour Force Survey
                                                       Jobseekers Allowance figures are seasonally adjusted                     Click back to
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EAU Economic Analysis Unit                                                                                                                                 5
North East Quarterly Economy Update                                 July 2010



Outlook                          Economic Forecast
Following the release of the latest Quarterly Inflation Report, the Bank of England has continued to
point to tailwinds from a weak exchange rate and the monetary policy stimulus, meeting headwinds,
from longer-term ‗balance sheet‘ adjustments (e.g. bank recapitalisation and sovereign debt).
Projection of the level of GDP based on market interest rate expectations and £200 billion
asset purchases (Bank of England Quarterly Inflation Report, May 2010)
                                                                                        The central projection points to continued output
                                                                                        growth based on the following rationale…
                                                                                (1)     Output continues to respond to the substantial monetary policy
                                                                                        stimulus, the effects of which haven‘t fully filtered through. The Bank
                                                                                        rate has been held at 0.5% for over a year now and the £200bn asset
                                                                                        purchase scheme to increase the money supply has been maintained
                                                                                        (―quantitative easing‖).
                                                                                (2)     Further improvements in lending and access to finance are built into
                                                                                        the forecast, whilst recognising that banks are rebuilding their own
                                                                                        balance sheets, which restricts the growth in lending.
                                                                                (3)     The weak sterling exchange rate contributes to growth, boosting
                                                                                        exports ion 2010 and leading domestic consumers to switch demand
                                                                                        more toward home-produced products.
                                                                                (4)     The ‗destocking‘ process, which accounted for much of the fall in GDP
                                                                                        reverses more sharply than previous recessions and boosts output in
                                                                                        the near term. The inventory cycle is anticipated to be a key
                                                                                        component of growth in 2010 (see slide 7)
                                                                                BUT …the degree of uncertainty is reflected by the spread
                                                                                   in the fan chart, which remains skewed towards the
                                                                                   downside of the central forecast.
- The OECD, IMF, World Bank and a number of other organisations provide alternative UK forecasts but the advantage of the Bank of England‘s ‗fan chart‘ is
that it serves to illustrate just how uncertain these forecasts are. That said, the consensus points to positive growth during 2010. HM Treasury compare a range
of independent UK economic and employment forecasts at http://www.hm-treasury.gov.uk/data_forecasts_index.htm


                                          Sources/notes:   Bank of England Quarterly Inflation Report, May 2010.
                                                           http://www.bankofengland.co.uk/publications/inflationreport/irlatest.htm       Click back to
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EAU Economic Analysis Unit                                 The GDP projection shown here is based on market interest rate                                         6
                                                           expectations and the £200bn asset purchases by The Bank
North East Quarterly Economy Update                             July 2010



Outlook                      OBR Budget Outlook
The newly-created Office for Budget Responsibility forecasts were published in the new
Government‘s emergency Budget, and provide insights into the components of
economic growth anticipated over the coming years.
Contributions to GDP growth (OBR, HMT Treasury Budget 2010)
 4

                                                                       The previous slide illustrates the degree of uncertainty
 2                                                                     involved in economic forecasting. Accepting that to be the
                                                                       case, the recent OBR forecasts help to show which
 0                                                                     components of the economy might be expected to drive
          2009        2010      2011              2012
                                                                       growth and recovery. The key points to note in the chart
-2
                               Net Trade                               and table opposite are:
                               Change in Inventories                   -     GDP grows by 1.2% this year but this increases to 2.3% in
-4                             Government                                    2011 and 2.8% in 2012.
                               Dwellings investment
                               Business Investment
                                                                       -     Government spending makes a small contribution to
-6
                               Household Consumption                         growth this year, before spending is reined back and
                                                                             reduces output growth by 0.7% and 0.6% in next two
-8                                                                           years.
                             2009      2010    2011      2012
                                                                       -     The single largest source of growth in 2010 is accounted
     Total GDP Growth (%)     -4.9      1.2     2.3       2.8                for by restocking (change in inventories) but this is a
                                                                             short-term boost and drops out of the equation by 2012.
     Household Consumption    -2.1      0.2      0.8      1.1          -     By 2011, Business Investment and Household
     Business Investment      -2.1      0.1      0.8        1                Consumption are anticipated to return more strongly.
     Dwellings investment     -0.6     -0.2      0.2      0.2
                                                                       -     Net trade is forecast to contribute to growth in 2010 and
     Government                0.8      0.3     -0.7     -0.6
     Change in Inventories    -1.2      1.2      0.4        0
                                                                             this contribution increases in 2011 and 2012.
     Net Trade                 0.7      0.5      0.9      0.9


                                       Sources/notes:    http://www.hm-treasury.gov.uk/junebudget_documents.htm      Click back to
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EAU Economic Analysis Unit                                                                                                               7
North East Quarterly Economy Update                            July 2010



Outlook                New orders
Incoming business and new orders received by North East private sector firms has
continued to grow – a leading indicator that we might expect further improvements in
activity in the coming months
Is the level of new orders and incoming business at
your company higher, the same or lower this month                         -      New business at North East private sector companies rose at a
than one month ago?                                                              solid pace during the latest survey period, which panel
                                                                                 members linked to improved demand conditions. The
                                                                                 seasonally adjusted Incoming New Business Index posted
     60                                                                          54.1, down from 58.4 in April. Over 26% of respondents
                                                                                 recorded increased new work on the month. However, growth
     50                                                                          has slowed compared to April, to a rate broadly in line with the
                                                                                 UK average. Reports linked the weaker expansion of incoming
                                                                                 new business to client hesitancy and uncertainty surrounding
     40
                                                                                 the recent general election.

     30                                                                North East Incoming Business, Purchasing Managers Index
                                                                                                                 North East Companies                All UK
     20                                                                                               Higher                Lower Seasonally         S. Adj
                                                                                                                 Same (%)
                                                                                                        (%)                   (%)   Adj. Index       Index
                                                                    Height of recession…
     10                                                             December 2008                       6.8        43.2     50.0        29.8          36.5
                                                                    Last quarter…
       0                                                            March                              37.0        56.5     6.5         61.3          57.5
                                                                    April                              34.7        55.1     10.2        58.4          55.9
           Higher (%) Same (%)         Lower (%)                    May                                26.2        54.8     19.0        54.1          54.2


                                      Sources/notes:   RDA/Markit Purchasing Manager Index ® North East report
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EAU Economic Analysis Unit                                                                                                                                    8
North East Quarterly Economy Update                                        July 2010



 Business                           Survey overview

A summary of surveys from around the region give an indication of the current
business climate, and expectations for the coming months…
Source               Survey name             Timing          Summary

Engineering          Manufacturing Outlook   Quarterly       In the past three months all regions have seen a balance of companies report rising orders, the first time this has occurred since
Employers            (based on Business      June 2010       the second quarter of 2008. The North East and North West were the only regions with negative balances in Q1 2010 and the
Federation (EEF)     Trends Survey)                          strong rebound in Q2 has been due in part to the substantial pick up in domestic and export orders for motor vehicles. In terms of
                                                             jobs, only the North East reported a significantly negative employment balance over the past three months. However, all regions
                                                             including the North East are now expecting to see a positive employment balance through the third quarter.

North East           Business Barometer      Quarterly       Following on from the Q4 2009 survey, the Q1 2010 survey shows that whilst many balances remain positive, some have
Chamber of           (with Barclays)         Q1 2010         weakened and some have turned negative once more. However, the weak recovery seems to be continuing with UK orders and
Commerce                                                     export sales and orders still in positive territory. Changes to workforce levels seem to have stabilised but whilst future wo rkforce
(NECC)                                                       expectations have risen, confidence remains fragile.

Business             BENE Business Index     May 2010        Participants in the survey reported that the level of optimism among the majority of businesses remains strong with more than half
Enterprise North                                             reporting that their business profitability and their overall business confidence are expected to improve in the coming months.
East (BENE)                                                  Orderbooks, infrastructure investment and future changes to the workforce are all showing positive balances.

Inst. of Chartered   Business Confidence     Quarterly       Having seen sales increase by just 0.6% over the last year, firms in the North East and Cumbria expect volumes to grow strongly
Accountants in       Monitor                 Q2 2010         this year. Sales volumes are forecast to increase by 6.1% over the coming year, up from expectations of 4.7% growth last quarter.
England and                                                  This is the highest projected growth rate since 2007, underlining the renewed confidence in prospects for the region‘s firms.
Wales                                                        Additionally, whilst firms in the region suffered a decline of 1.0% in employee numbers over the past 12 months, there is now an
                                                             expectation of an increase in staff numbers of 1.7% over the coming year – the strongest forecast since Q3 2008.

Manpower             Employment Outlook      Quarterly       North East employers anticipate a somewhat improved hiring picture in Q3 2010 as compared with Q2. The increase of 7
                     Survey                  Q3 2010         percentage points on the quarter is the highest of any region. Regionally and nationally, the outlook is also improved on the same
                                                             quarter one year ago. All regions bar the South West have seen hiring intentions improve year-over-year. Nationally, employers
                                                             in three sectors expect headcount growth during the third quarter of 2010 – Finance & Business Services, Manufacturing and
                                                             Utilities.


Consumer Confidence Surveys - The Nationwide’s Consumer Confidence Index fell back in May with the index falling by 10 points to 65. There
was no change to the Spending Index but consumers‘ expectations for the future diminished. Similarly the GFK NOP index of consumer confidence for May
saw decreases for both confidence in their personal financial situation in the next 12 months, and confidence in the "general economy‖ over the next 12 months.
The ‗major purchase Index‘ also decreased by one point this month to -21.


                                                Sources/notes:
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EAU Economic Analysis Unit                                                                                                                                                                           9
North East Quarterly Economy Update                                       July 2010



Business                        Credit conditions

Access to credit remains significantly more restricted than pre-recession,
although there is some evidence that demand and availability are improving.
                                                                Bank of England Corporate Lending Questionnaire (Q1 2010)
 Bank of England, Credit Conditions
 Survey, Quarter 1 2010
 - The overall availability of credit to businesses           Factors contributing to changes in credit availability
 continued to increase in 2010 Q1. Spreads                                         Changing economic outlook
 and fees (i.e. the cost of lending) on corporate                                Changing sector-specific risks
 lending had narrowed for medium and large                                             Market share objectives
 corporates over the past three months, but
                                                                         Market pressures from capital markets
 widened slightly for small businesses.
 - Demand for credit by private non-financial                                        Changing appetite for risk

 corporations (PNFCs) in 2010 Q1 rose more                                   Changing cost/availability of funds
 strongly than anticipated for small and                      Factors contributing to changes in demand for lending
 medium-sized businesses and was unchanged                                            Mergers and acquisitions
 for large PNFCs. Demand was expected to
                                                                                             Capital investment
 rise further over the coming quarter.
                                                                                              Inventory finance
 - The chart opposite indicates that further
 improvements in lending are expected, due in                                      Balance sheet restructuring
 large part to the improving economic outlook.                                         Commercial real estate
 However lender ‗appetite for risk‘ will remain
                                                                                                                   -5   0        5       10       15       20       25       30       35
 muted. On the demand side, it is notable that
 there remains a negative balance on the                                                                      Net % balance of responses – expected changes in next 3 months
 demand for lending to fund capital investment,
 whereas there is an expectation that in the                 Interpreting the chart above: To calculate             aggregate results, each lender is assigned a score based on their response. Lenders who
                                                             report that credit conditions have changed ‗a lot‘ are assigned twice the score of those who report that conditions have changed ‗a little‘. These
 next three months, businesses will require                  scores are then weighted by lenders‘ market shares. The results are analysed by calculating ‗net percentage balances‘ — the difference
 more finance to ‗re-stock‘ (inventory finance).             between the weighted balance of lenders reporting that, for example, demand was higher/lower or terms and conditions were tig hter/looser. The
                                                             net percentage balances are scaled to lie between ±100. This table reports the net percentage balance of respondents for each question in the
                                                             corporate lending questionnaire. Positive balances indicate that lenders, on balance, reported/expected demand/credit availab ility to be higher
                                                             than over the current three-month period. (http://www.bankofengland.co.uk/publications/other/monetary/creditconditionssurvey1004 01.pdf)




                                            Sources/notes:     Bank of England publications on credit conditions available at
                                                               http://www.bankofengland.co.uk/publications/other/monetary/credit                                          Click back to
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EAU Economic Analysis Unit                                     conditions.htm                                                                                                                                10
North East Quarterly Economy Update                                       July 2010



Business                               Costs and prices
Costs of production have been accelerating as the country moves out of recession and
with selling prices only marginally higher.
                                                                                             Input costs
       North East Input Costs, Purchasing Managers Index                                     - Input prices had been rising rapidly before Autumn 2008 but the onset of
                                                                                             recession led to a marginal decline in costs for the period through to
      Pre-recession, costs rising                                                            Autumn 2009. September 2009 onwards saw a return to input cost rise.
                                                                                             - May 2010 was the first month in over a year where the rate of input cost
                                                                                             change in the region was higher than nationally. 43% of North East
                                                                    Costs rising second
                                                                    half of 2009 into 2010
                                                                                             private sector companies, in both manufacturing and service sectors, saw
                                                                                             a rise in their input costs during the month, whilst for the first time in
                                                                                             almost two years, no panellists noted a fall.
                            Costs stable in
                            first half of 2009                                Rising         - Those North East firms that reported an increase in the average cost of
                                                                                             their purchases generally attributed this to rising fuel and raw material
                                                                                             prices as well as unfavourable exchange rates and increased salaries.

                                                                              Falling          North East Output Prices, Purchasing Managers Index
                                                                                                          Pre-recession, prices rising



 Output prices
 - In the North East output prices fell for 16 consecutive months to February.                                                                                    Rising
                                                                                                                           Prices falling
 However, each of the past three months saw marginal increases in                                                          throughout 2009
 charges.
 - Output price change has generally been lower in the region than                                                                                                Falling
 nationally over the past couple of years.                                                                                                   NE prices show
                                                                                                                                             marginal increases
 - The index score of 42.8 posted in May 2009 was a series low but the rate                                                                  from March 2010
 at which prices were falling moderated through the second half of 2009 and
 whilst prices starting increasing again in the UK in December 2009, in the
 region output prices moved above 50 in March 2010.

                                                 Sources/notes:   RDA/Markit Purchasing Manager Index ®
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EAU Economic Analysis Unit                                                                                                                                                  11
North East Quarterly Economy Update                                      July 2010



 People                   Vacancies
Vacancies in the North are showing signs of picking up - January, March and May
were the first months since November 2008 that notified vacancies were higher than 12
months previously
May 2010 saw around 3,200 more vacancies notified to North East Jobcentre Plus offices than in the same month a year earlier. In May 2009 there were 15,500 notified
vacancies and by May 2010 this level had risen to 18,700 – an increase of 21%. However, this percentage change was not mirrored across all sectors of the North East
economy
One sector in particular saw vacancies running well above those seen one year ago. Business Services & Finance had 3,100 add itional vacancies when compared with May
2009 – a rise from 8,300 notified vacancies 12 months ago to 11,400 in May 2010. Two sectors continue to see vacancies, as they generally have been throughout the past
year, running below levels compared to the same month 12 months previously. These sectors are Construction and Distribution, hotels and restaurants

Jobcentre Plus notified vacancies in the North East compared to last year                       …and broken down by sector in May 2010




                                              Sources/notes:   Office for National Statistics
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EAU Economic Analysis Unit                                                                                                                                                12
North East Quarterly Economy Update                                July 2010



People                 Employment
The region remains significantly short of matching the present UK employment
rate, but has made considerable long-term progress.
                                                                                Residents in employment in the North East
 Employment
 - There has been significant regional employment growth over
 the past decade.
 - Whilst the number of employed people living in the North East
 was broadly stable for the three years up to the end of 2008,
 the numbers have declined in 2009.



‘Employment gap’ between the UK and the North East




                                                                                               Employment gap to the UK
                                                                                               - Since 1999, the North East‘s ‗employment gap‘ - the increase in
                                                                                               regional employment required to match the national employment rate -
                                                                                               has fallen from over 120,000.
                                                                                               - The economic slowdown in the region saw progress stall during the
                                                                                               first half of 2008



                                         Sources/notes:   Office for National Statistics; Labour Force Survey
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EAU Economic Analysis Unit                                                                                                                                      13
North East Quarterly Economy Update                              July 2010



 People              Skills
Lower skilled occupations make up the core group of the unemployment stock
   JSA claimants by sought occupation in the North East, May 2010



                                                                                           ¾ of men looking for jobs such                     Male JSA
                                                                                           as labourers, factory workers                      claimant
                                                                                           and drivers and construction                       occupation
                                                                                           and vehicle tradesmen                              profile

                                                          JSA claimant occupation profile




                                                                                                                                              Female JSA
                                                                                                                                              claimant
Key points                                                                                                                                    occupation
- Of the 79k JSA claimants in the North East in                                                                                               profile
May 2010, around 59k are men and 20k women
- The majority of JSA claimants are seeking work in those
occupations typified by lower levels of qualifications NVQ Level 2                      Nearly 9 in 10 women looking
                                                                                        for jobs such as receptionists,
or below – for men Elementary occupations, Process, plant &                             nursery nurses, sales and
machine operatives and Skilled Trades and for women Sales and                           catering assistants
customer service, Elementary, Administrative and secretarial and
Personal service occupations

                                      Sources/notes:   Office for National Statistics
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EAU Economic Analysis Unit                                                                                                                            14
North East Quarterly Economy Update                              July 2010



Place              Sub-regional unemployment
The spatial impact of the recession has been non-uniform, but all four sub-
regions have seen reductions in claimant unemployment recently.
      - Within the region, those areas with traditionally high levels of unemployment have some of the largest absolute increase in unemployment, but
      areas with previously low rates have seen some of the most rapid percentage changes

Rising unemployment, stalling…for now…                                  Sub-regional non seasonally adjusted claimant count monthly change,
                                                                        January 2008 to present
- Roughly, non-seasonally adjusted North East
JSA rose slowly at first from around 45k in
November 2007 and much more quickly from
Summer 2008 to reach about 85k by May 2009
where it remained for the rest of 2009. January
2010 saw numbers peak at 90k but by May
2010 regional JSA had fallen back to 80k
- The 18 months to May 2009 saw JSA
unemployment rise significantly in all parts of
the region but the last 3 months in particular
have seen JSA numbers fall in each of the four
sub-regions
- County Durham saw some of the highest
rates of JSA increase during the recession
whilst other North East sub-regions saw
increase more in line with the national average




                                        Sources/notes:   Office for National Statistics
                                                         Jobseekers Allowance figures are not seasonally adjusted               Click back to
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EAU Economic Analysis Unit                                                                                                                              15
North East Quarterly Economy Update                               July 2010



 Place              Housing market

Market uncertainty and risks are still impacting on the housing market. Property
prices have been stabilising recently
There have been some recent, tentative signs of change in the housing market although the Bank of England‘s Inflation Report noted that the recovery in the
housing market was fragile. The charts below show the speed of the decline in house prices in the region and the more recent recovery. Elsewhere, there are
reports that loan approvals and new buyer enquiries have been picking up, albeit from a low base.

    Housing market

    - The May Nationwide and Halifax House Price Indices present a somewhat contradictory view with Halifax reporting small house price falls in
    April and May and Nationwide reporting small rises. This suggests a broadly stable picture. Both indices report significant annual increases in
    house prices – Halifax at 6.9% and Nationwide with 9.8% higher prices than 12 months ago.
    - The pick up in house prices through 2009 was largely down to a low supply of properties being put up for sale. However, more recently there
    have been indications that more sellers have been coming into the market with perhaps the suspension of Home Information Packs and
    uncertainty around changes to Capital Gains Tax being contributing factors.

     Change in North East house prices, Apr 2005 – Apr 2010




                                         Sources/notes:   Land Registry, Nationwide, Lloyds Banking Group
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EAU Economic Analysis Unit                                                                                                                             16
North East Quarterly Economy Update                                July 2010



 Place               Rural economy
Rural England business activity rose again in May, extending the current period
of growth to eleven months
Produced in a similar fashion to the regional level private sector
Purchasing Managers‘ Index, this new national level Rural PMI Index is           Rural News
based on the monthly responses of over 200 companies operating in the            The Journal, 22nd June, reported that…
rural manufacturing and service sectors. PMI surveys are the first
                                                                                 - Research by the Organisation for Economic Co-operation and Development
indicators of economic conditions published each month.
                                                                                 (OECD) and the UN Food and Agriculture Organisation, forecasts positive growth
    Output / Business Activity, England Rural PMI                                in prices for most key commodities would be up on the last decade before the
                                                                                 price spike in 2007/8.
                                                                                 - Wheat prices to remain volatile, but stronger, over the course of the
                                                                                 decade. Demand for ethanol is expected to boost prices for maize.
                                                                                 - Researchers said that oilseed prices could jump by as much as 40% compared
                                                                                 to the 10 years up to 2007.
                                                                                 - Dairy is predicted to be one of the fastest growing sectors, prices are expected
                                                                                 to increase by around 2-3% a year and to stay between 15% and 40% higher than
                                                                                 1997-2007. Butter prices are expected to grow at the fastest rate.
                                                                                 - Livestock producers would benefit from world meat consumption and will see
                                                                                 one the highest growth rates on the back of economic growth.
                                                                                 - Beef prices are expected to rise by around 21% and pork by 17%, while poultry
    - May 2010 marked the eleventh month in a row that the index                 prices are predicted to jump by an average of 32% compared to the 2007-9
    posted an expansionary score of over 50                                      period.
                                                                                 Northumberland Citizens Advice Bureau Newsletter, June
    - However, the rate of expansion was the lowest since July 2009
                                                                                 - In the last financial year (09/10) Northumberland CAB experienced an 11%
    and for the eighth month in succession was lower than that seen
                                                                                 increase in the number of people they supported and a 10% increase in the
    across the economy as a whole
                                                                                 number of issues they dealt with, compared to the previous financial year 08/09.
    - Respondents reported that the slower increase in output primarily          - The majority of enquiries were either debt or benefits related, combined with a
    reflected only meagre gains in new business                                  48% increase in homelessness queries.


                                          Sources/notes:   Defra/Markit Purchasing Manager Index ®
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EAU Economic Analysis Unit                                                                                                                                      17
North East Quarterly Economy Update                       July 2010



Further information                                    External links
Information on the other regional initiatives designed to respond to the downturn can be found at One North East‘s news centre:
http://www.onenortheast.co.uk/page/news/index.cfm

HM Treasury page dedicated to regional economies:
http://www.hm-treasury.gov.uk/ukecon_regional_focus.htm

HM Treasury comparison and compilation of independent economic forecasts is available at:
http://www.hm-treasury.gov.uk/data_forecasts_index.htm

Bank of England Quarterly Inflation Report:
http://www.bankofengland.co.uk/publications/inflationreport/irlatest.htm

Bank of England Trends in Lending report - a new monthly publication that presents the Bank‘s assessment of lending to the UK
economy.
http://www.bankofengland.co.uk/publications/news/2009/035.htm

Bank of England Regional Agent‘s monthly summary of business conditions:
http://www.bankofengland.co.uk/publications/agentssummary/index.htm

A review of the evidence on the economic drivers of Government funded business support is available at:
http://www.berr.gov.uk/files/file48470.pdf




                                      Sources/notes:
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EAU Economic Analysis Unit                                                                                                        18
North East Quarterly Economy Update                      July 2010



Further information                                    Key data sources
North East Regional Information Partnership (NERIP)

Office for National Statistics Regional Trends

                                                                          NOMIS Local
Office for National Statistics Regional Labour Market Bulletin            Authority Profiles:
                                                                          Alnwick
NOMIS: a service provided by the Office for National Statistics           Berwick-upon-Tweed
                                                                          Blyth Valley
providing free access to labour market statistics                         Castle Morpeth
                                                                          Chester-le-Street
                                                                          Darlington
                                                                          Derwentside
Nationwide‘s Consumer Confidence Barometer                                Durham
                                                                          Easington
                                                                          Gateshead
                                                                          Hartlepool
Department for Business Innovation and Skills - Regional                  Middlesbrough
                                                                          Newcastle-upon-Tyne
Economic Performance Indicators                                           North Tyneside
                                                                          Redcar and Cleveland
                                                                          Sedgefield
                                                                          South Tyneside
                                                                          Stockton on Tees
                                                                          Sunderland
                                                                          Teesdale
                                                                          Tynedale
                                                                          Wansbeck
                                                                          Wear Valley



                                      Sources/notes:
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EAU Economic Analysis Unit                                                                       19

								
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