Although the latest Royal Bank of Scotland (RBS) purchasing managers’ index (PMI) report showed that the Scottish economy remained firmly stuck in a downturn last month, the strongest-ever level of business confidence for the year ahead was reported.
Although the report’s business activity index – a measure of combined manufacturing and service sector output – pointed to a slower pace of reduction than seen in January, it still remained well in negative territory and the rate of decline was faster that the UK as a whole.
The downturn was centred on services, which saw a further marked drop in activity, while manufacturing output returned to growth.
Meanwhile, inflows of new business declined further, amid reports that ongoing Covid-19 measures had stymied client demand.
Malcolm Buchanan, chair of RBS’ Scotland board, said: “Lockdown measures continued to stifle the Scottish economy in February. Both business activity and inflows of new work fell steeply again, although the rates of decline eased notably since January. Ongoing logistical issues and price hikes at suppliers forced costs higher still but, with client demand constricted, firms increased their charges only modestly.
“Despite the challenging conditions, Scottish companies reported the strongest level of business confidence on record in February, with the lockdown roadmap prompting hopes of easing restrictions and a strong economic recovery in the coming year.”
Scottish private sector employment declined for the 13th straight month during February with firms blaming continuing restrictions and temporary closures for cutting back on staffing.
Job cuts were concentrated on the services sector, as manufacturers registered a slight rise in staffing levels. Overall, the rate of job shedding was the slowest for a year.
February data marked a ninth successive monthly increase in cost burdens facing Scottish private sector firms. Moreover, the latest rise was the fastest for a year. Greater raw material costs, price hikes at suppliers, higher logistical expenses and fees associated with Brexit were the main drivers of inflation according to respondents.
The survey data is compiled by IHS Markit from responses to questionnaires sent to a panel of around 500 manufacturers and service providers.