Scotland's private sector sees activity growth slow to 17-month low

The Scottish private sector again lost momentum in July, with firms fearful over the economic outlook, according to a new report from Royal Bank of Scotland (RBS).

The lender said its seasonally adjusted headline business activity index – a measure of combined manufacturing and service sector output – registered 50.2 last month, down from 54.4 in June, signalling the weakest rate of growth in the current 17-month run of expansion.

New business fell for the first time since March 2021, with weakness generally originating from the manufacturing sector, though service-providers saw rates of growth for both output and new orders weaken, RBS added in the purchasing managers' index report.

It also found that firms across Scotland signalled a renewed fall in new orders, and while the rate of reduction was only found to be mild, it marked the first contraction since March 2021. Furthermore, as has been the case since April 2021, Scottish private sector firms raised their employment levels, and input costs spiked, stretching the current bout of input price inflation to 26 months.

Malcolm Buchanan, chair of the Scotland board at RBS, said: "The Scottish private sector lost growth momentum for the third month running during July. Encouragingly, employment continued to rise, extending the current period of job-creation to 16 months. That said, the rate of payroll growth was the softest seen since April 2021.

"While there were signs that price pressures have peaked, costs continued to rise sharply overall. Along with signs of weakening demand, an uncertain economic outlook and the cost-of-living crisis, a number of firms expressed concerns around the outlook and fears of a recession in the year ahead.”