Scots private firms optimistic despite output slowdown, says RBS

RBS' headline PMI slid to 52.2 in November from 53.4, with the slowest growth seen since March. Picture: Greg Macvean.
RBS' headline PMI slid to 52.2 in November from 53.4, with the slowest growth seen since March. Picture: Greg Macvean.
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Scottish output growth momentum slowed last month although confidence towards future activity levels gained pace, according to data published today by Royal Bank of Scotland.

The Gogarburn-based lender’s seasonally adjusted headline purchasing managers’ index decreased to 52.2 in November. This was down from 53.4 in October and signalled the slowest expansion in private sector output since March, although growth was stronger than that for the UK as a whole.

Total new orders received by Scottish private sector firms increased, reflecting an upturn in the service sector, as manufacturers registered a reduction in sales.

New contract wins supported growth in the former, while weak underlying demand conditions affected workloads at the latter. That said, the overall expansion was only moderate and weaker than in October.

The lender also flagged a further decline in outstanding business at privately-run firms in Scotland, with the rate of depletion “marked and the sharpest in just over two years”. Weaker growth in sales enabled unfinished orders to be cleared.

Nonetheless, job creation was maintained during the month. And despite employment growth weakening since October and being slight overall, it was stronger than the long-run average.

Pressures on margins remained, with a sharp rise in input costs, but firms were more confident towards future growth prospects than in October.

Planned company growth, new marketing strategies and stronger international competitiveness were all mentioned as reasons reinforcing confidence.

Malcolm Buchanan, chair of the Scotland board at RBS, said: “In line with the slowdown seen for the UK as a whole in November, Scotland’s growth momentum also eased. Dragging the Scottish economy was broad-based weakness across both manufacturing and service sectors.”

He added: “Indeed, short-term growth prospects seem meagre. Order books expanded at a weaker pace, firms hired extra staff less aggressively, and capacities remain underutilised, as evidenced by a stronger fall in backlogs.

“Nonetheless, confidence towards future activity levels improved. Despite the current Brexit upheaval, some companies are anticipating expansions and international competitiveness improvements over the coming year.”

Meanwhile, a report from BDO also published today has flagged a fall in business output last month across the UK.

The accountant and business advisor said the economy is set to “stagger” to the end of 2018 after output in November fell to its lowest level since July, to 97.69 from 97.72 in October.

Business confidence slumped for a fourth consecutive quarter to its lowest level since January 2017 to 100.33 compared to 101.25 last month, the business trends report also found.