Scotland's economy: private sector growth '˜subdued'

There has been a further slight increase in Scottish private-sector output, Bank of Scotland has revealed today.

Manufacturers have increased their output at a steady rate. Picture: David Davies/PA Wire

The lender said survey data for June revealed that activity growth in the service sector was unchanged from May while manufacturing grew at a slower rate. Input and output price inflation eased slightly last month, although the latter remained high.

The bank said its purchasing managers’ index (PMI), which measures the month-on-month change in combined manufacturing and services output, fell to 51.1 from 51.5 in May, indicating modest output growth below the survey’s historical average.

Manufacturers upped their output at a steady rate, and while the rate of growth eased since May, production growth was above that of business activity in the service sector.

The figures also uncovered a return to employment growth in June, with job-creation consistent across both sectors and faster among manufacturers. Scottish employment growth, however, was still weaker than seen across the UK.

Input price inflation remained robust, and there was evidence linking rising input costs to pay pressures and the weak pound.

Fraser Sime, regional director, Bank of Scotland commercial banking, said: “Manufacturing, which was previously a key driver behind private sector growth, softened in June.

“The services sector remained subdued overall and with an unchanged rate of expansion since May.”

He praised employment returning to growth and input price inflation further decreasing. “In addition, June’s data extended the current sequence of expansion to seven months, the longest recorded for almost two and a half years,” he continued.

“Finally, business confidence fell in June, although to a lesser extent than seen across the UK as a whole.”

Economy Secretary Keith Brown said the latest PMI figures “signal expansion in Scotland’s private sector in every month, for the first half of this year” while business sentiment “remains positive”.

He added: “It is a further vote of confidence in the Scottish economy, coming on the back of GDP figures that show growth four times that of the UK figure over the first three months of the year, with unemployment also at a record low of 4 per cent.”

Nonetheless, he stated that uncertainty around Brexit “continues to cast a shadow over the future economic outlook, threatening jobs, investment and living standards. The Scottish Government will continue to use all of the powers at our disposal to grow the Scottish economy”.

A separate study published today found that Scottish SMEs expect tougher business conditions over the next year. The Q2 2017 SME Growth Tracker commissioned by Amazon UK and Enterprise Nation, said their confidence score was -16 while they predicted revenue growth of 1.8 per cent over the coming year, equal to the national average.