SCOTTISH private sector economic growth slowed in September, following five consecutive months of acceleration, but expansion was nevertheless robust, a key survey shows.
Royal Bank of Scotland’s latest PMI (purchasing managers’ index) report, published today, shows manufacturing activity north of the Border dipped last month, while services companies achieved solid growth overall.
Sebastian Burnside, chief economist at Royal Bank, highlighted uncertainties over international trade amid growing concerns over a no-deal Brexit and a continuing focus on US President Donald Trump’s policies.
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Commenting on the Scottish manufacturing sector’s slide into contractionary territory, Mr Burnside said: “[There are] two things I would call out there as potentially being of concern. We are seeing again quite an unclear picture on the international trading front.
“You have Trump putting more tariffs on Chinese goods fairly recently. You have got him doing slightly better deals with Canada and Mexico, which is good. The other one, certainly from my conversations with clients, [is] more businesses are thinking harder [about] what a no-deal Brexit could mean.”
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He added: “That makes for quite a messy picture if you are trading internationally, quite a challenging environment.”
The PMI for Scotland, which measures the combined output of the manufacturing and services sectors, dipped from 55.5 in August to 53.4 in September on a seasonally adjusted basis.
While remaining well above the level of 50 deemed to separate expansion from contraction, the September reading signalled the slowest pace of growth in five months.
And Scotland’s private sector economic growth rate fell below that of the UK as a whole last month, even though the UK PMI dipped from 54.2 in August to 54.1 in September.
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The August PMI reading for Scotland had signalled the fastest pace of growth of the private sector economy north of the Border for more than four years.
Mr Burnside said of the slowdown in Scottish growth last month: “We would be reasonably relaxed about that at this point. I think there is a lot of good, strong fundamentals underneath the Scottish economy and lots of the other data suggest we are getting a good rate of growth.
“If you look at the GDP (gross domestic product) statistics, we have stronger growth in Scotland than the rest of the UK at the moment. Hopefully, this [the fall in the Scottish PMI] is just a monthly blip, rather than the start of a trend.”
Mr Burnside took encouragement from Scottish companies’ continuing optimism over prospects for increased activity on a 12-month time horizon, and viewed this as a signal that firms were not “panicking”.
He said: “I think that is a nice marker to use.”
Royal Bank noted: “The degree of confidence strengthened since August, reflecting greater positive sentiment in both the goods-producing and service-providing sectors. Upbeat demand projections, greater marketing budgets and planned expansions into new markets supported positive output forecasts.”
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