Tag: business activity

RBS: Private sector activity expands for the second month running

  • Quickest rise in private sector activity since June 2022
  • Growth in new orders also picks up
  • Employment growth at eight-month high

According to the latest Royal Bank of Scotland PMI® data, the Scottish private sector saw a second successive monthly rise in business activity, with underlying data showing quicker growth across both the manufacturing and service sectors.

The rate at which private sector output grew was the strongest in nine months, with the Scotland Business Activity Index rising from February’s 51.0 to 52.9 in March. This compared favourably against the UK as a whole (52.2), where the rate of expansion slowed.

Furthermore, firms across Scotland noted a solid and accelerated rise in new business inflows in March. In turn, back-to-back expansions were noted in private workforce numbers, again the latest rate of job creation quickening on the month and signalling the strongest intake of staff since last July.

Private sector companies across Scotland signalled a second monthly rise in volumes of new business at the end of the first quarter. The upturn was quickest since last May and robust overall. The rise in business inflows was attributed to an array of reasons including increased advertising and investment, stronger sterling against the dollar and improved client demand. Nonetheless, the uptick in new order inflows was weaker than that recorded for the UK as a whole.

While the degree of confidence weakened in March, due to a slight dip in optimism at service providers, business sentiment towards 12-month activity was highly positive and above the historical trend. Optimism stemmed from greater client enquires, new business development, higher marketing and new contracts in the pipeline. Confidence across Scotland, however, posted the third-weakest of all the monitored UK regions, ahead of the North East of England and Northern Ireland.

Firms across Scotland raised their payroll numbers for the second successive month in March. The rate of job creation was the fastest seen in eight months, with only Northern Ireland registering stronger growth across the UK.

The positive performance of the sector supported a stronger intake of staff, suggested anecdotal evidence. Underlying data pointed to quicker upturns in workforce numbers across both the manufacturing and service sectors.

Scottish firms were able to reduce their outstanding business during March, thereby stretching the current run of contraction to ten months. The rate of backlog depletion remained unchanged from the preceding survey period, the joint-softest decrease in unfinished work in the aforementioned sequence. The rate of decrease in backlogs across Scotland was quicker than that seen at the UK level.

Continuing the trend observed since December 2022, private sector firms noted a further cooling in input cost inflation during March. The rate of growth was the weakest in 22 months and only marginally faster than the UK-wide average. Nonetheless, the pace of inflation was comfortably above the long run average, with respondents blaming wage, food and energy costs.

In line with the strong growth in prices, Private sector firms across Scotland raised their charges sharply. That said, the pace of charge inflation was the second-softest in 22 months, behind February’s reading. Charges levied for the provision of goods and services across Scotland rose at a similar pace to that seen across the UK as a whole.

Source: Royal Bank of Scotland, S&P Global.

Judith Cruickshank, Chair, Scotland Board, Royal Bank of Scotland, commented: “The rate of expansion in private sector activity across Scotland quickened at the end of the first quarter.

“Both manufacturing and services registered growth, with goods producers noting the stronger upturn. More so, improved investment and advertising has been fruitful, with order volumes picking up at a historically strong rate.

“The upturns in output and new business resulted in a further expansion in workforce numbers. In fact, despite levels of unfinished work falling at a modest pace, hiring activity across the Scottish private sector was at an eight-month high.

“Looking ahead, confidence across the private sector faltered slightly from the recent high seen in February. Nonetheless, private sector firms across Scotland were strongly confident in regards to longer term future output.”

RBS: Business activity growth weakens to 17-month low in July

  • Output expands fractionally amid renewed drop in sales
  • Softest increase in employment since April 2021
  • Price pressures cool, but remain rapid

Business activity across the Scottish private sector increased at only a fractional pace during July, according to the latest Royal Bank of Scotland PMI® data.

The seasonally adjusted headline Royal Bank of Scotland Business Activity Index – a measure of combined manufacturing and service sector output – registered 50.2 in July, down from 54.4 in June, signalling the weakest rate of growth in the current 17-month run of expansion.

Moreover, new business at Scottish private sector firms fell for the first time since March 2021. Sector data showed that weakness generally emanated from the manufacturing sector, though service providers in the region saw rates of growth for both output and new orders weaken since June.

Private sector firms across Scotland signalled a renewed fall in new orders during July. While the rate of reduction was only mild, it marked the first contraction since March 2021. The respective seasonally adjusted index was pulled down by a sharp reduction in factory orders across the region, while a weaker upturn in sales was seen at service providers. Panellists linked the decline to reduced customer spending amid the cost of living crisis and rising economic uncertainty.

In contrast to the contraction observed in Scotland, the UK as a whole reported a modest expansion in new orders.

Business confidence strengthened marginally across Scottish private sector firms in July. Surveyed companies hoped that new customers and improvements in client spending will lead to expansions in activity in the coming 12 months. Nevertheless, the overall degree of optimism was the second-lowest in 21 months, with a number of firms concerned about the challenging economic climate, the cost-of-living crises and potential recessionary risks.

Additionally, Scottish private firms were less upbeat than the average UK business.

As has been the case since April 2021, Scottish private sector firms raised their employment levels in July. Although the rate of job creation was the slowest in 15 months, it remained stronger than the series average (50.5).

Companies that raised their workforce numbers attributed this to higher business requirements, but firms also highlighted difficulties finding staff amid labour and skill shortages and a competitive labour market.

Of the 12 monitored UK regions, Scotland reported the softest increase in staffing levels in July, while the North East of England was the only region to register job losses.

Levels of outstanding business fell across Scottish private sector firms for the second consecutive month in July. The rate of depletion was broadly unchanged from June and modest, as the quickest decline in manufacturing backlogs in over two years was largely offset by a renewed rise in unfinished business at services companies. Firms primarily stated that lower sales drove the latest reduction in outstanding orders.

Nine out of the 12 monitored UK regions, including Scotland, posted a decrease in work-in-hand, with data signalling easing pressures on capacity across the UK as a whole.

Input costs rose sharply across Scottish private sector firms during July, thereby stretching the current bout of input price inflation to 26 months. The rate of increase eased to a five-month low, but remained amongst the fastest on record. According to surveyed businesses, higher commodity prices, Brexit, and the war in Ukraine had all placed upwards pressure on costs.

The pace of cost inflation in Scotland was slightly faster than that observed across the UK as a whole.

For the twenty-first successive month, private sector firms in Scotland raised their charges for goods and services in July. While the pace of increase softened to a seven-month low, it remained sharp overall and was quicker than the historical average. Firms often mentioned raising their prices in line with higher costs of raw materials and energy.

Of the 12 monitored UK regions, only the East of England saw a softer increase in charges than Scotland.

Source: Royal Bank of Scotland, S&P Global.

Malcolm Buchanan, Chair, Scotland Board, Royal Bank of Scotland, commented: “The Scottish private sector lost growth momentum for the third month running during July.

“Activity levels were broadly unchanged as the post-pandemic rebound continued to fade and firms faced intense cost pressures and greater economic uncertainty. Manufacturing firms in the region noted sharp declines in production and new orders, while service providers reported only mild expansions in activity and sales.

“Encouragingly, employment continued to rise, extending the current period of job creation to 16 months. That said, the rate of payroll growth was the softest seen since April 2021.

“While there were signs that price pressures have peaked, costs continued to rise sharply overall. Along with signs of weakening demand, an uncertain economic outlook and the cost of living crisis, a number of firms expressed concerns around the outlook and fears of a recession in the year ahead.”