By Ian McConnell
SCOTLAND’S private-sector economy shrank for a second consecutive month in September and business confidence sank to its lowest for more than two years, amid the inflation squeeze, a key survey shows.
Royal Bank of Scotland’s business activity index, which measures combined manufacturing and services sector output, edged up from 47.8 in August to 48.0 last month on a seasonally adjusted basis, but remained well below the level of 50 deemed to separate expansion from contraction. New orders fell for a third straight month, according to the bank’s PMI (purchasing managers’ index) Scotland report.
Although the rate of employment growth picked up slightly last month from August, it was the second-weakest since spring 2021.
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Royal Bank said: “According to anecdotal evidence, successful hiring was in part linked to fresh graduates entering the workforce.”
Business confidence about the prospects for increased activity on a one-year horizon weakened for a second consecutive month to the weakest for 28 months, with Royal Bank noting this had occurred “amid soaring prices and recession fears”.
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Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: “The squeeze on customer disposable incomes amid a high inflation environment underpinned the latest downturn in output and new business. Despite falling business requirements, firms raised employment…albeit at a moderate pace. The combination of a drop in new work and expanding workforces allowed firms to work through their backlogs.”
She added: “The post-pandemic boom is clearly at an end, as the ongoing cost-of-living crisis plays an increasingly important role. Moreover, the 12-month outlook continues to weaken.”
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