Business activity in Scotland outpaced most other parts of the UK in June but employment growth across the private sector was among the weakest, according to latest figures produced by the Royal Bank of Scotland.
Despite a “solid increase” in output, there were plenty of signs of slowing momentum with data on new orders and overall confidence softening as price pressures remained intense. Though still expanding, business activity in Scotland eased for the second straight month.
The bank’s PMI data – which measures the manufacturing and service sectors – showed a headline activity reading of 54.4 for Scotland, down from 55.9 in May. Anything above 50.0 signifies expansion.
This put Scotland third among the 12 nations and regions monitored by the Royal Bank, behind London and the south-east of England. The East Midlands, the east of England and Northern Ireland all registered contractions, with the latter falling for the second month in a row and at the quickest rate since February 2021.
READ MORE: UK economy shrinks in April as recession fears back in spotlight
However, Scotland’s performance on the employment index was relatively poor with the country recording the weakest expansion of anywhere except the north-east of England, the only region to report job losses. Optimism in the Scottish private sector was also weaker than across the UK as a whole.
“The Scottish private sector recorded another solid increase in output during June,” said Malcolm Buchanan, Scottish chairman of the Royal Bank.
“That said, there were signs of a further slowdown in momentum, as activity and new orders increased at the weakest rates in five and 15 months respectively. Moreover, the latest survey data signalled contractions in output and orders across the manufacturing sector.”
The expansion in business activity was the softest since January. While the recovery from Covid lockdown measures continued to boost activity, concerns over rising costs and a slowing economy pushed business confidence to a 20-month low. Among its anecdotal evidence, the bank said there were reports of clients cutting back on expenditure because of rising costs.
READ MORE: GfK UK consumer confidence index drops to fresh record low
Costs across the private sector increased for the 25th month in a row. The rate of input price inflation eased for the second month running from the survey high recorded in April, but remained among the steepest on record.
“Ongoing shortages of materials, increased energy prices and higher wages all contributed to another surge in input costs during June,” Mr Buchanan said. “The rate of input price inflation eased only slightly from May and remained among the fastest on record.”
Scottish firms raised their charges to customers again in June, extending the current bout of output price inflation to 20 months. The pace of inflation eased to the slowest since January, but the seasonally-adjusted index remained well above the historical average.
New orders among private Scottish firms continued to rise, but trends diverged at a sectoral level as manufacturing firms reported a faster reduction in factory orders while service providers reported a modest expansion in sales. Overall, new business increased at the weakest rate for 15 months and “only slightly”.
Firms continued to expand workforce numbers with the rate of job creation easing from May’s seven-month high, but still stronger than the series average. Survey panel members said firmer demand conditions and rising workloads supported additional staff hires.
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