SCOTLAND’S private sector economy expanded in November at its slowest pace since March amid muted growth in new business and an easing back of job creation.
Bank of Scotland’s purchasing managers’ index (PMI), which measures month on month change in manufacturing and services output north of the Border, underlined that cost pressures remained “elevated” for private sector businesses in Scotland.
The seasonally-adjusted index, published today, dropped back to 50.2 on November from 52.7 in October, representing the weakest reading since March. With a reading of 50 deemed to separate expansion from contraction, it effectively means the private sector economy in Scotland was barely in growth mode last month.
By contrast, the UK PMI delivered a reading of 54.9 for November, with expansion falling back marginally on October (55.8).
The latest Scottish PMI found that manufacturing firms saw production grow solidly in November, with growth accelerating for a second successive month. The manufacturing output index grew marginally to 53.7 per cent from 53.4 in October, boosted by an increase in orders for the first time since August, albeit at a moderate level.
And the level of positive sentiment among Scottish manufacturers was found to have strengthened. This stems from anecdotal evidence of expectations of higher demand, new customer acquisitions and new product launches.
However, activity by service providers declined in November following six successive months of expansion. The services PMI dropped back to 49.4 in November from 52.6, as lower activity levels were linked to a lack of incoming business.
Incoming orders placed with Scottish service providers was unchanged, as those winning new orders were offset by others reporting a lack of new business and reports of uncertainty.
The private sector in Scotland has been challenged by price inflation since sterling’s Brexit voted induced woes, and according to the latest PMI costs remained “elevated” in the service sector in November. The services price index gave a reading of 61.5, down marginally on the 62.1 recorded for October, as input costs eased to a 14-month low. Higher fuel and labour costs were the main sources of input inflation.
In manufacturing, the price index illustrated that the costs burden on Scottish companies rose for a nineteenth consecutive month in November. While the reading of 62.1 was down on the 64.9 recorded in October, the report signalled that input price inflation for employers was still sharp, despite easing to its slowest pace since July. Firms put higher production costs down to hikes in the price of raw materials.
Despite the contraction in output growth, business optimism was found to have edged up across the private sector, reflected by firms adding to their payrolls for a sixth month in a row. Sector data suggested that employment gains were broad-based, with additional staff taken on in anticipation of greater order book volumes. However, the rate of job creation was modest across the private sector, and eased back slightly on the month before.
Fraser Sime, regional director of Bank of Scotland, said: “Output growth momentum appeared to wane across the Scottish private sector in November, as signalled by the headline PMI figure falling to an eight-month low. The service sector was a key contributor to this, with business activity declining for the first time since April.
“Weaker output growth coincided with broadly flat new business.That said, firms added to their payrolls for a sixth consecutive month.”
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