Fortnightly insight into the current state of the economy and how it relates to Dorset by Nigel F Jump, Chief Economist of Strategic Economics Ltd (a Dorset Company) and Visiting Professor in Economics at the Universities of Bath and Plymouth.
See: www.strategiceconomics.co.uk
Although it was still 13% below the pre-downturn peak (2008), the latest UK production data showed further near-term recovery. In the period up to November 2013, manufacturing was 2.8% higher that year than a year earlier (9% below peak).
Less positive is that the trade deficit continues to grow. In the three months to November, the goods deficit was £29.2 billion. Exports were 1.5% higher than the same period a year earlier whereas imports increased by 2.2%.
Essentially, our supply base remains too narrow. Even when we generate specific export success in terms of growing production, too often we have to import the components and materials to meet those increasing orders.
Nevertheless, the macro and regional signals are definitely more positive. For example, the PMI series for December were very strong. The SW private sector output and new orders measures were increasing at the “sharpest rates” ever seen since the series began in 1997. The output index touched 62.4 – higher than any other region or devolved administration (compared with SE 60.1 and UK 59.2). Employment also showed expansion. The index reached 58.6 – again, the highest in the country (SE 56.7, UK 54.9). At the end of 2013, the SW economy was outperforming its peers across the United Kingdom.
Meanwhile, CPI inflation got back to the official target of 2% in December for the first time since November 2009. Input and producer prices are adding downward pressure. Of course, this still means prices are rising: households and businesses are still feeling real negative pressure on incomes and earnings.
The only shame is that recent growth seems to have gone back to the old model of a consumer and housing-led recovery. The desire for an investment and export-led upturn remains thwarted. It looks like 2014 will start with good economic news for many more Dorset residents and businesses and this is welcome news. The key question remains, however: just how fit and ready we are to sustain an upturn into the medium term. This requires debt reduction, productivity growth and higher investment. The hope is that the current recovery will soon spark these three trends. The fear is that new debt/finance/housing ‘bubbles’ will emerge and burst. Business planning will reflect such hopes and fears as the new-year evolves.
Professor Nigel Jump
