By Ian McConnell
Business Editor
SCOTLAND’S private-sector economy contracted in August for the first time in 18 months, a key survey shows.
Royal Bank of Scotland’s business activity index for Scotland, which measures manufacturing and services output, fell from 50.2 in July to 47.8 in August on a seasonally adjusted basis, dropping below the 50 no-change mark for the first time since February last year.
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Inflows of new work fell for a second consecutive month, with the rate of decline accelerating, according to the Royal Bank PMI (purchasing managers’ index) report.
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Royal Bank said: “According to surveyed businesses, the downturn stemmed from weakening client demand, Brexit, the Ukraine-Russia war, and rising economic uncertainty.”
Employment in Scotland’s private-sector economy grew for a 17th consecutive month. However, the rate of job creation slowed to its weakest pace in 16 months.
And confidence among firms, about the prospects for increased activity on a 12-month horizon, declined to its weakest level for 27 months.
Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: “August data signalled a deterioration across the Scottish private sector, as activity levels fell for the first time in 18 months. Moreover, weak client demand and rising economic uncertainty, with a threat of a recession looming, resulted in falling inflows of new business.”
She added: “Moreover, the contraction across the sector impacted business confidence, which hit a 27-month low during August. Market uncertainties and the cost-of-living crisis heavily weighed on optimism and suggests a gloomy performance in the months ahead.”
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