Bank of Scotland

Scotland PMI: Private sector activity growth eases to eight month low

11 December 2017

  • Output growth softens to marginal pace

  • Cost pressures remain elevated

  • Business confidence picks up

Output in the Scottish private sector increased in November, albeit at the softest pace since March. Weak activity growth coincided with a softer rise in new business. Nevertheless, businesses increased employment in line with a stronger degree of confidence regarding future output.

The seasonally adjusted headline Bank of Scotland PMI® - a single-figure measure of the month-on-month change in combined manufacturing and services output - declined in November to 50.2, from 52.7 in October. The pace of expansion was marginal and the weakest since March.

In line with the trend for output, new orders placed with Scottish private sector firms increased at a weaker pace. Growth of new business was mild and eased to the slowest across the current 12-month period of expansion.

Businesses remained upbeat towards future growth prospects despite sluggish growth in output and demand. In fact, the degree of optimism edged higher across the private sector. Amid greater business confidence, firms added to their payrolls for a sixth consecutive month in November. However, the rate of job creation across the Scottish private sector was modest and eased slightly.

Price inflation in private sector input as a whole softened to the weakest since September 2016. As a result of receding cost pressures, selling prices increased in November to the weakest extent seen in the current 16-month run of inflation.

Fraser Sime, Regional Director, Bank of Scotland Commercial Banking said: 

"Output growth momentum appeared to wane across the Scottish private sector in November, as signalled by the headline PMI figure falling to an eight-month low. The service sector was a key contributor to this, with business activity declining for the first time since April.

"Weaker output growth coincided with broadly flat new business. That said, firms added to their payrolls for a sixth consecutive month in preparation of a further expansion in order-book volume. Concurrently, business confidence over future activity increased in November. 

"With milder demand corresponding with a 14-month low in input cost inflation, private sector companies increased selling prices only modestly."

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