NORTH WEST QUARTERLY ECONOMIC OUTLOOK August 2012
North West Quarterly Economic Outlook August 2012 Quarterly Economic Outlook Through the Regional Leaders Board the North West s five Local Enterprise Partnership areas are working together on a collaborative research programme, which aims to improve knowledge sharing on key issues likely to affect all parts of the region. One of the key elements of the research programme is the North West Quarterly Economic Outlook (NW QEO), which provides a snapshot of the regional economy. The UK economy is still extremely fragile and it contracted by 0.7% in the second quarter of the year. This follows a 0.3% decline in Q1 2012. Following the 0.3% contraction in Q4 2011, this means that the UK is now suffering its worst doubledip recession in more than 50 years, with the Bank of England now forecasting zero growth for 2012. The challenges facing the NW as a result of the ongoing economic uncertainty have changed little over the last year. Labour market problems remain the most pressing issue to address and unemployment (those who want to work, are available to work, and are actively seeking employment) amongst people aged 16 and over in the NW was recorded at 9.5% in April 2012, well above the UK average of 8.1%. Of particular significance is the fact that the NW has the third highest level of regional unemployment, behind only the NE (10.9%) and Yorkshire & Humber (9.7%). On an annual basis, NW unemployment has increased by 0.9 percentage points (pp), a more significant rise than the 0.4pp increase seen for the UK as a whole. On a monthly basis, the number of Jobseeker s Allowance (JSA) claimants (people claiming unemployment-related welfare benefits) in the NW declined by 1.3% (-2,700) to just under 198,000 people in June 2012, compared to 200,000 in May. But on an annual basis, the number of JSA claimants in the NW remains 12,800 (6.9%) higher than this time last year. There are also more than 92,000 long-term (6 months+) claimants based on the latest data for June, a substantial annual increase of 45.8% (+29,000). The outlook for NW businesses is also fairly challenging and the Lloyds Regional Purchasing Managers Index for June shows that private sector growth in the region has effectively stagnated. The NW Quarterly Economic Survey published by the British Chambers of Commerce offers a slightly more optimistic view, with companies showing a degree of resilience to ongoing challenges and exports continuing to support growth. Despite the economic downturn, the NW has still managed to grow its exports, which HMRC data shows increased to 26.4billion in 2011, from 24.8billion in 2010. Exports in the region are primarily being driven by chemicals, machinery & transport, and manufactured goods. In line with most of the UK, the housing market in the NW is still struggling. The average property cost 110,047 in May 2012, and year-on-year house prices in the NW have now declined for 19 consecutive months. At a NW level, the number of new dwellings completed since 2008 has not gone above 10,000 in any given year, compared to 2000 07, when around 16,000 20,000 new homes were being completed each year. Key Data for the North West Indicator Date Value Annual Change Unemployment rate (16+) Apr 2012 9.5% Total Jobseekers Allowance claimants June 2012 197,599 Youth JSA claimants (16-24) June 2012 58,230 Long-term JSA claimants (6 months+) June 2012 92,305 Lloyds regional PMI June 2012 50.0 Average house price June 2012 111,167 01
North West Quarterly Economic Outlook August 2012 PEOPLE OUTLOOK NORTH WEST LABOUR MARKET STILL FRAGILE Assessing the level of regional unemployment provides an important indicator on the current state of the labour market. There are two key measures of unemployment: the International Labour Organisation (ILO) definition; and the number of people claiming Jobseeker s Allowance (JSA). The ILO measure of unemployment assesses the number of jobless people who want to work, are available to work, and are actively seeking employment. It differs from the JSA measure, which only includes people claiming unemploymentrelated welfare benefits. The ILO measure gives a higher figure than the claimant count because it includes those who are classified as available for work but who are not claiming jobless benefits. ILO unemployment amongst people aged 16 and over in the NW was recorded at 9.5% in April 2012, virtually in line with the March figure of 9.4% (see Figure 1). This was well above the UK average of 8.1% and also meant that the NW has the third highest level of regional unemployment, behind only the NE (10.9%) and Yorkshire & Humber (9.7%). On an annual basis NW unemployment has increased by 0.9 percentage points (pp), a more significant rise than the 0.4pp increase seen for the UK as a whole. The latest Jobseeker s Allowance (JSA) data show that just under 198,000 people were claiming JSA in the NW in June 2012 (see Figure 2) lower than the figure for May 2012 of 200,000 and representing a monthly decline of 1.3% (-2,700), though this was a smaller decline than the GB level of 1.7%. However, the overall number of JSA claimants in the NW remains 12,800 (6.9%) than this time last year, compared to the GB level of 4.7%. Youth unemployment (JSA claimants aged 16-24) in the NW also decreased on a monthly basis between May and June, declining by 1,900 to 58,200. There are still 4,500 (8.4%) more young people claiming JSA benefits than there were in June 2011, higher than the GB level of 5.9%. There were 92,300 long-term (6 months+) claimants in the NW in June 2012, essentially the same as in May 2012, but on an annual basis 45.8% (+29,000) higher, above the GB rise of 43.3%. It is possible to analyse the JSA data in further detail by looking at claimant rates at a ward level expressed as the proportion of the resident population in each 2003 Census Area Statistic (CAS) ward aged 16 64 claiming JSA 1. Of the 1,006 CAS wards in the NW, 27 had a JSA claimant rate of between 10% and 15% in June 2012 (see Figure 3). The top five highest rates by ward were: 1. Bloomfield (Blackpool) 14.9% 2. Granby (Liverpool) 14.2% 3. Central and Falinge (Rochdale) 14% 4. Claremont (Blackpool) 13.8% 5. Linacre (Sefton) 13.1%. Turning to other labour market data, the number of vacancies reported to Jobcentre Plus rose sharply on a monthly basis between May and June up by 50.9% from nearly 45,600 to just under 63,000. Vacancies data can be subject to significant variations and should be treated with caution, although the latest figures suggest that there are still opportunities out there in the labour market. Despite the increase in vacancies, the fact that long-term claimants continue to rise is a real worry. Whilst the employment prospects for young people appear to be improving, those that became unemployed last year have struggled to re-enter the labour market, suggesting that older workers are also facing real difficulties. 1 New ward boundaries have been introduced in recent years in a number of areas in the NW, however for consistency the 2003 CAS wards have been used in the analysis. 02
Figure 1: ILO Unemployment Rate, 2011-2012 10.0% Unemployment Rate (People Aged 16+) 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Source: Office for National Statistics NW UK 220,000 Figure 2: North West Jobseeker's Allowance Claimants 100,000 95,000 Total JSA Claimants 210,000 200,000 190,000 180,000 170,000 TOTAL LONG-TERM (6 Months +) YOUTH (16-24) 90,000 85,000 80,000 75,000 70,000 65,000 60,000 55,000 Youth and Long-Term Claimants 160,000 50,000 June 2011 September 2011 December 2011 March 2012 June 2012 Source: NOMIS
North West Quarterly Economic Outlook August 2012 Figure 3 JSA Claimants Rates by North West Ward Source: Data sourced from NOMIS, map produced by New Economy Note: The map shows 2003 CAS wards since 2003 a number of ward boundaries have changed in the NW, however for consistency the 2003 CAS wards have been used when producing the map. 04
North West Quarterly Economic Outlook August 2012 BUSINESS ACTIVITY OUTLOOK REMAINS CHALLENGING FOR FIRMS The latest Lloyds TSB Regional Purchasing Managers' Index (PMI) for June 2012 provides an indication of the current state of the manufacturing and service sectors. It is based on original survey data collected from a representative panel of companies in each UK region. The June PMI served to highlight how challenging the economy remains for firms in the region, with the PMI recorded at 50.0. While this was up on the May PMI of 48.4, a figure above 50 is needed to indicate expansion. This means that even with a monthly rise in activity, the NW economy effectively stagnated in June (see Figure 4). The UK PMI was recorded at 51.4 in June, representing the lowest overall national rise since November 2011. The NW Quarterly Economic Survey (QES) undertaken by the British Chambers of Commerce is another useful indicator on the state of the regional economy. It gauges the opinion of more than 1,500 manufacturing and services businesses across the NW on a number of key topics, including recruitment, exports and general business confidence. The Q2 2012 QES reports that in the manufacturing sector, the net balance of firms reporting positive export sales was +16% an increase on the +13% recorded in Q1 2012 and above the levels seen in Q2 2011. For export orders in the manufacturing sector, there was a positive balance of +7% down slightly on the Q1 figure of +10%. For the services sector, export sales were strong at +12% in Q2 2012. In addition, the balance for export orders was also positive at +10%, a slight increase on the +8% recorded in the first quarter of the year (see Figure 5). Regional trade statistics published by HMRC show that total exports from the NW have been on the rise since 2008 they increased by 2.6billion at current prices (11%) to reach 26.4billion in 2011 (see Figure 6). Exports in the region are primarily being driven by chemicals, machinery & transport and manufactured goods. While the main export destinations in 2011 continue to be the EU (52%) and North America (19%), Asia & Oceania (17%) and the Middle East and North Africa (4%) are also key markets. 60.0 Figure 4: Lloyds Regional Purchasing Managers Index 58.0 56.0 54.0 52.0 50.0 48.0 46.0 44.0 Source: Lloyds Banking Group NORTH WEST UK 05
30% Figure 5: NW Chamber Quarterly Economic Survey, Export Sales and Orders Trends 25% 20% Net Balance of Firms 15% 10% 5% 0% -5% -10% Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Source: NW Chamber of Commerce Manufacturing Export Sales Services Export Sales Manufacturing Export Orders Services Export Orders 29,000 28,000 Figure 6: North West Imports and Exports (current prices) Trade Balance - 1,850m Trade Balance 1,026m Trade Balance 197m Trade Balance - 1,058m 27,464 ( million) 27,000 26,000 25,591 26,406 25,000 24,795 24,496 24,000 23,741 23,849 23,000 22,823 22,000 2008 2009 2010 2011 Source: HM Revenue & Customs Exports Imports
Quarterly Economic Outlook August 2012 PLACE NORTH WEST CONTINUING TO SEE A SLOWDOWN IN THE HOUSING MARKET Figure 7: North West Housing Market 160,000 18,000 Average House Price 140,000 120,000 100,000 80,000 60,000 40,000 HOUSE SALES HOUSE PRICES 16,000 14,000 12,000 10,000 8,000 6,000 4,000 House Sales 20,000 2,000 0 0 Jun-96 Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Source: Land Registry Housing Market In line with the majority of the country, the housing market in the NW has effectively stalled. The average property cost 111,167 in June 2012 according to the Land Registry, which is actually 1.1% (+1,300) higher than the May, but is 1.3% ( 1,500) less than it was this time last year (see Figure 7). This compares with England & Wales as a whole, where the average cost of a property in currently stands at 161,677 a marginal annual increase of 0.4% (+ 700). The latest house sales data published by the Land Registry for April show that total sales in the NW fell significant to 4,600 down from 6,300 in February (see Figure 7). This reflects the end of the stamp duty holiday in March, which offset the introduction of the Government-backed NewBuy scheme designed to support 95% mortgages. Property sales across the region remain substantially below their pre-recession levels of 10,000 15,000 per month. A lack of new build housing means that property prices will continue to remain too high for many people. Data published by the Department for Communities & Local Government show that between the financial years of 2000/01 and 2008/09, around 15,000-20,000 new homes were being completed each year in the NW. For the 2011/12 financial year only 9,600 properties were completed in the NW less than half the number when figures peaked at more than 20,000 in 2005/06. Airport Passengers The latest Civil Aviation Authority data show that passenger numbers at the region s three major airports stood at 2.13million in May 2012, a year-on-year decline of just over 119,000 (-5.3%). As a whole, UK airports saw an annual decline in passenger numbers of 0.4% (-86,000) between May 2011 and 2012. Manchester Airport had total passenger numbers of 1.72million in May 2012 an annual decline of 1.2% (-20,400). Liverpool John Lennon Airport saw passenger numbers fall by 20% between April 2011 and 2012 from 486,000 to 389,000. Blackpool Airport also experienced a decline in passenger numbers, which fell from 22,300 to 20,000 (10.0%) between May 2011 and 2012 (see Figure 9). 07
Quarterly Economic Outlook August 2012 25,000 Figure 8: North West Dwellings Started and Completed 20,000 15,000 10,000 5,000 0 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 Source: Department for Communities& Local Government Dwellings Started Dwellings Completed Figure 9: North West Airport Passenger Numbers Airport Passenger Numbers Year on Year Change May 2012 May 2011 Number % Manchester 1,718,234 1,738,627-20,393-1.2 Liverpool John Lennon 389,437 485,694-96,527-19.9 Blackpool 20,042 22,275-2,233-10.0 Total 2,127,713 2,246,866-119,153-5.3 Source: Civil Aviation Authority 08
Quarterly Economic Outlook August 2012 UK OUTLOOK ECONOMY SHRINKS BY 0.7% IN Q2 2012 The UK economy contracted by 0.7% in the second quarter of the year (see Figure 10). The contraction was higher than expected and follows a 0.3% drop in the first three months of the year. The Office for National Statistics (ONS) said this was largely due to a sharp downturn in the construction sector, where activity fell by 5.2% in Q2 2012 its biggest drop since Q1 2009. On releasing the new GDP data, the ONS said it was not yet sure on the extent to which the poor weather and the extra June Bank Holiday for the Diamond Jubilee affected the economy. This means that the GDP data, which are the first estimate for what happened in the economy between April and June, are more uncertain than usual. Taking into account the 0.3% fall in GDP in the Q4 2011, the UK is now in its worst double-dip recession for more than 50 years, with the Bank of England now forecasting zero growth for 2012. Interest rates remain unchanged at 0.5%, and it is now more than three years since rates were first cut to this record low. More positively, the rate of Consumer Prices Index (CPI) inflation declined from 2.8% to 2.4% in June according to ONS. While this remains above the Bank of England s target rate of 2.0%, it is a significant improvement on the peak of 5.2% in September 2011, and means that inflation now stands at its lowest level for 2½ years. Despite the falling level of inflation, the overall economic climate is still extremely fragile, and the Bank of England announced another 50 billon round of Quantitative Easing between July and October 2012, with more expected. The latest UK construction Purchasing Managers Index (PMI) published by Markit shows increasing activity in the sector. A PMI above 50 indicates expansion, and it rose from 48.2 in June to 50.9 in July. Despite the rise, it still only represented a marginal increase to overall UK construction output. In manufacturing, the UK PMI in July was 45.4 its lowest level since May 2009 and a further indication of how tough conditions are for the sector. Figure 10: UK GDP % Quarterly GDP Change 1.5 1 0.5 0-0.5-1 -1.5-2 -2.5 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0 % Annual GDP Change Source: Office for National Statistics Quarterly GDP Change Annual GDP Change 09
For further details on the North West Quarterly Economic Outlook contact: New Economy Churchgate House 56 Oxford Street Manchester M1 6EU Tel: 0161 236 7222 Email: richard.cook@neweconomymanchester.com Web: www.neweconomymanchester.com