Tag: Royal Bank of Scotland PMI data

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.”

Renewed growth in Scottish private sector activity

  • Headline Business Activity Index at 51.0 in February, up from 47.1
  • Recovery in growth of new orders as firms cite greater demand
  • Price pressures continue to cool

The Scottish private sector registered the first rise in private sector activity for seven months in February according to the latest Royal Bank of Scotland PMI® data.

The Business Activity Index – a measure of combined manufacturing and service sector output – moved back within in the expansion territory, printing 51.0, up from 47.1 in January, as growth resumed across both the manufacturing and service sectors, with the former leading the expansion.

Panel members reported an improvement in demand conditions and growth in new clients helped boost activity. New orders also rose, following seven consecutive months of decline.

The upturn in new orders helped with the first rise in workforce numbers in three months. Furthermore, despite remaining stubbornly high, cost pressures continued to diminish. All in all, the positive performance of the Scottish private sector fed into higher levels of confidence.

Inflows of new business rose across Scotland in February, ending a seven-month period of decline. Upturns were similar across the two sub-sectors. Panel members noted growth in sales and new projects and clients helped revive growth.

New orders also rose at the UK level. However, the pace of increase was stronger than that observed for Scotland.

Sentiment was firmly positive and improved further from December’s recent low across Scotland in February. Expectations were largely pinned on new product launches, increased marketing and projected growth in customers and sales.

That said, optimism across Scotland remained muted when compared to the UK as a whole.

Employment rose across Scotland, following back-to-back months of decline. The respective seasonally adjusted index ticked up to a five-month high, signalling a rate of job creation that was firmer than the long-run average. According to anecdotal evidence, employment increased to meet order intakes and replace leavers.

The pace of job creation across Scotland was faster than the UK-wide average, which also recorded a rise in employment for the first time in three months.

Private sector companies across Scotland continued to reduce their backlogs during February, stretching the current sequence of reduction to nine months. Improved efficiency and previous months of fewer orders allowed firms to complete unfinished orders. That said, the pace of depletion was the weakest in the aforementioned sequence, reflecting only a fractional decline at service providers.

In contrast, backlogs of work rose across the UK as a whole for the first time in four months.

A rapid rise in input costs was registered across Scotland in February. Respondents blamed the latest increase in private sector expenses on energy prices, higher costs from suppliers and inflation generally. While historically elevated, the rate of input price inflation was the softest in 21 months and weaker than the UK-wide average.

Scotland registered one of the slowest increases in input prices among the 12 UK regions, ahead of the North West and East of England.

Charges levied for the provision of Scottish goods and services rose sharply in February. Inflation, Brexit and higher costs from suppliers continued to push charges up, according to anecdotal evidence. However, the pace of increase slowed notably to the weakest since April 2021.

Of the 12 monitored regions, Scotland reported the weakest incline in output charges.

Continued…

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

Judith Cruickshank, Chair, Scotland Board, Royal Bank of Scotland, commented: “Private sector output registered growth mid-way through the first quarter of 2023.

“The headline index signalled a mild expansion in output and marked the first month of increase since July 2022. Firms reported that a revival in customer demand and growth in new clients helped boost sales and activity.

“Growth in business requirements resulted in higher intakes of staff across both goods producers and service providers, while backlogs fell for the ninth month running.

“Furthermore, with inflationary pressures continuing to cool off, the Scottish private sector reported a modest performance overall, a change from the contractions seen since last August. Additionally, with confidence strengthening to an 11-month high, we hope that the upturn across Scotland will continue in the coming months.”