Scottish private sector's pace of growth at five-month low



Scottish private sector output expanded slowly in September with the pace of growth easing to a five-month low amid a slower rise in workloads.

The seasonally adjusted Royal Bank of Scotland PMI Index fell to 53.4 in September, down from August’s peak of 55.5.

Although this signalled a weaker increase, the pace of expansion was robust and above the survey average.

But, that said, the latest data ended a five-month sequence of accelerating growth rates.

Sector data showed that the latest expansion was not broadly based with manufacturers seeing a slight drop in production levels, compared to solid growth among service providers.

For the first time since June, growth at the UK level was stronger than that in Scotland.

Volumes of new work continued to rise during the latest survey period.

New contract wins and stronger demand from existing clients supported the upturn in sales, according to panellists. That said the rate of growth in new orders was only modest and below the UK average.

Service sector businesses recorded higher new business inflows, while the intake of new work at goods producers declined.

Scottish private sector employment rose in September. While the rate of job creation was modest it was quicker than August’s six-month low.

Expectations of pressures from stronger demand motivated survey respondents to do more recruitment and workforce numbers rose at a comparatively quicker pace across the UK as a whole.

Survey data signalled that Scottish private sector companies were able to cope with current business demands. Overall, outstanding workloads were unchanged since August.

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Operating costs continued to rise in September. Higher labour costs, unfavourable exchange rate movements, and higher food and transport costs were all mentioned as sources of inflationary pressure.

Although cost burdens increased sharply overall, the increase was the softest of all 12 monitored UK regions. To guard against eroding margins, output charges were lifted in September and to the greatest extent in four months.

Business optimism was sustained in September, with the degree of confidence strengthening amid forecasts of further demand and planned expansion into new markets.

Malcolm Buchanan, chair, Scotland Board, Royal Bank of Scotland, said: “Scotland’s private sector economy continued to expand at a solid pace as the third quarter came to a close.

“However, growth momentum was lost, with the rate of expansion slowing for the first time in five months. This renewed slowdown particularly reflected a weaker rise in new business.

“The sector drill down revealed a contrasting state of affairs, with output, new orders and employment all contracting in the manufacturing economy, but rising at service providing businesses.

“Indeed, growth in the service sector has been well anchored in recent months, and looks set to continue to support the overall Scottish business environment.”

Nick Stamenkovic, RBS economist, said: “The recent improvement in business activity since the spring took a pause for breath dropping to a five month low and falling below the UK average. However, companies were sufficiently confident to boost employment albeit modestly.”



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