A mixed picture for Greater Manchester in April 2011

New Economy today released the latest edition of the Manchester Monitor, which provides an analytical snapshot of the economic wellbeing of Greater Manchester.

New Economy warns that, after a relatively robust start to 2011, the latest business indicators suggest that growth is starting to stall. Coupled with rising global oil prices, international uncertainty over the impact of the Japanese earthquake, and the prospect of an imminent increase in the Eurozone interest rate (which, alongside persistently high inflation, will put pressure on the Bank of England to increase the UK base rate), New Economy’s research suggests that the prospect of a prolonged slowdown has markedly increased.

Leading indicators suggest that business conditions are already worsening in Greater Manchester. The proportion of businesses classified as high risk is now 37.1% (35,000 businesses), up from 33.8% in March 2010. Simultaneously, the number of business deals has fallen over the year by a third to just 9 in February 2011. Greater Manchester Chamber of Commerce’s quarterly economic survey shows that domestic sales and orders remain low, and that employment growth in the next quarter is expected to be limited in both the service and manufacturing sectors. However, exports remain steady for all sectors and, more positively, around two-fifths of employers are still expecting to recruit.

The housing market is still weakening with Greater Manchester seeing a fall in the average house price over the last year and consecutive falls in house prices have now been experienced in each of the last four months. The number of sales has also dipped, highlighting a continued reluctance to purchase houses at the current market price and indicating a loss of confidence as individuals become concerned about future employment prospects. However, Greater Manchester’s housing market performed more strongly over the month than both national and regional averages.

A more positive picture was reported from the labour market where the apparent worsening of the business environment has yet to feed through. There has been a significant annual fall in jobseeker’s allowance claimants of 9.3% – greater than the 7.7% decrease experienced nationally. However, despite increasing by 6.1% since January, the number of vacancies reported by employers to Jobcentre Plus has fallen by 10.9% compared with February 2010. Again, this suggests a business sector that may be starting to stutter.

There are still some positive signs for business in Manchester, though. Construction orders rose by 1.3% on the year, outperforming the North West and national levels by a considerable margin. Consumer confidence in the city centre also appears high – figures provided by CityCo suggest a continued increase in retail turnover and a continued increase in footfall into key areas of the city centre. This is further confirmed by Marketing Manchester’s hotel occupancy figures, which have shown an increase on the year.

John Holden, Deputy Director of Research at New Economy said:
“With the positive figures that have come out on the performance on the UK’s service sector in quarter 1 of 2011 a technical return to recession – two consecutive quarters of negative economic growth – is unlikely. However, our analysis suggests that the steam may be running out of the recovery and we may be heading to a period where the economy moves between no growth, low growth and possibly negative growth for an extended period.”

Baron Frankal, Director of Economics at New Economy said:
“Clearly if this month’s business figures are the start of a trend it is worrying. However, together with other indicators on the labour market and retail spending, the Manchester Monitor overall suggests that Greater Manchester’s economy is still in reasonable health. Looking forward, with the unprecedented level of global turbulence, persistently high inflation, and public sector spending cuts starting in earnest this month, it seems that this could be the calm before the storm.

“Elements of the recently released budget will promote increased growth and Greater Manchester needs to grasp these. In particular, the designation of Manchester Airport City as an enterprise zone may encourage the growth of new businesses and create new jobs which will boost the economy for years to come. We will need to stick to a course of action that will help promote growth and prosperity in Greater Manchester.”

ENDS

Notes to Editors
For further information please contact John Holden, Head of Strategic Research, New Economy on 0161 237 4179.

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