Scotland’s private sector economy remained just inside growth territory last month but conflicting signals have emerged today on the outlook for the rest of the year.
Output expanded for the second successive month in January, according to Bank of Scotland’s latest purchasing managers’ index (PMI), which provides one of the most reliable indications of the state of the domestic economy.
However, growth remained marginal and the report warned that job cuts were evident amid falling backlogs of work.
The seasonally adjusted headline index – a single-figure measure of the month-on-month change in combined manufacturing and services output – scored 50.3, unchanged from December’s reading. Any result above 50 denotes expansion.
The PMI coincides today with separate surveys from two accountancy firms, BDO and Grant Thornton, which offer contrasting, and at times conflicting, messages on the state of Scotland plc.
BDO’s “business optimism index” shows confidence north of the Border falling to a three-year low. The index reading of 100 is seen as the “tipping point” below which firms expect their output growth to drop under the long-term trend rate.
The findings follow what the firm describes as a “challenging” start to the year for the Scottish, UK and global economies. BDO said the impending EU in-out referendum was fuelling further uncertainty for companies looking at their long-term prospects.
Meanwhile, Grant Thornton’s international research suggests that Scottish businesses are “resilient and growing” in the face of global headwinds.
Despite uncertainty over the oil price and the long-term future of the country’s largest sector, more than half – 56 per cent – of Scottish respondents believe their profits will increase this year. The figure is higher than the global average of 44 per cent, but below the 63 per cent of UK-wide respondents predicting a rise in profitability.
According to Bank of Scotland, the Scottish private sector recorded a further contraction in employee numbers during January. The rate of job shedding quickened from December but was “relatively weak”.
Job cuts were evident in both the manufacturing and service sectors with some purchasing managers linking the fall to a combination of higher wage costs and the downturn in the oil industry.
Alasdair Gardner, the lender’s regional managing director for commercial banking, said: “Growth in Scotland’s private sector remained in a low-gear during the first month of 2016 as service providers continued to outperform their manufacturing counterparts.
“Challenging market conditions in the oil and gas sector allowed for only a slight rise in incoming new business levels whilst job shedding accelerated to a six-month high.”