GROWTH of Scotland’s private sector economy slowed sharply in May and manufacturing output contracted for the first time since January, but employment growth north of the Border was the fastest in the UK, a survey shows.
The business activity index for Scotland in Royal Bank of Scotland’s purchasing managers’ index (PMI) report dropped from a 10-month high of 54.3 in April to 50.7 in May on a seasonally adjusted basis, with the latest reading only slightly above the no-change mark of 50 and thus signalling only modest expansion. Growth was the slowest in the current four-month run of expansion.
Only two of the 12 nations and regions of the UK covered by the survey registered a weaker business activity reading than Scotland, with Yorkshire and Humber recording marginal growth and Wales posting a slight contraction.
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Services growth in Scotland cooled, the survey indicated. Manufacturing output fell and the sector saw a second consecutive monthly decline in new orders.
Highlighting the robust employment picture in Scotland, Royal Bank observed: “Companies further expanded employment with both sub-sectors registering solid rates of job creation, albeit at slightly softer rates than seen in the previous survey period.”
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Noting employment in Scotland’s private sector economy had increased for a fourth consecutive month in May, with growth in staffing north of the Border being the fastest in the UK for the first time since June 2018, it added: “Firms attributed the increase in payroll numbers to successfully filling long-standing roles and increased recruitment to help with enhanced workload.”
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Overall confidence levels among companies across Scotland were unchanged in May from the previous survey period. Firms were optimistic of growth in activity over the coming 12 months, Royal Bank noted, “with expectations pinned on increased client demand, introduction of new products and resilient markets”.
However, of the 12 nations and regions of the UK, Scotland recorded the third-weakest optimism reading, ahead of only Northern Ireland and north-east England.
Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: "Scotland’s private sector started the second quarter with a solid rise in output in April, but May’s data signal a loss of momentum as services growth slowed and manufacturing output fell for the first time in four months. The latest expansion in private sector output was the softest in the current sequence of expansion that began in February.
“Inflationary pressures cooled as cost burdens rose at the softest pace in two years. Nonetheless, both input price and output charge inflation remained stubbornly elevated, and much above their respective pre-pandemic trend levels.”
She added: “On a positive note, firms continued to expand workforce numbers. Moreover, solid hiring was reported across both sub-sectors. Additionally, optimism remained strong as private sector firms anticipated growth in the coming year."
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