Bank of Scotland PMI survey points to post-Brexit growth slow-down

Nick Laird
Nick Laird

October survey data collected by Bank of Scotland pointed to a slower expansion of Scotland’s private sector. Output growth weakened, new business levels stagnated and volumes of incomplete work deteriorated while costs soared.

But companies continued to add to their payrolls despite facing the sharpest increase in input costs since September 2011. Moreover, a further rise in output charges was reported, although the rate of inflation was weaker than that for input costs.

Scotland’s private sector grew for a second successive month, highlighted by the seasonally adjusted headline Bank of Scotland PMI – a single-figure measure of the month-on-month change in combined manufacturing and services output – falling to 50.6 in October, down from 51.2 in September, and pointing to a softer overall upturn.

The increase in output was broad-based across manufacturers and service providers, with both reporting marginal growth in business activity levels.

Nick Laird, Regional Managing Director, Bank of Scotland Commercial Banking, said: “Output for Scottish private sector companies continued to show growth in October, albeit at a reduced rate weighed down by a combination of higher input prices and stagnating new business. The increasing cost burden is a cause for concern, with the rise in input costs growing at the quickest rate in just over five years attributed to the depreciation of Sterling.”

He added: “Encouragingly, workforce numbers rose for a third consecutive month. Yet with a further solid decline in backlogs of work recorded, we could see jobs growth come under pressure towards the end of the year.”

New order intakes in Scotland’s private sector stagnated, following a marginal expansion the previous month. A fractional increase in new business at service providers was weighed down by a slight contraction in the manufacturing sector.

Job creation continued in Scotland’s private sector for a third successive month. That said, the latest increase in staffing levels was the weakest during this trend.

Scotland’s private sector companies reported the quickest deterioration in outstanding business for eight months. Where a decline in incomplete work was recorded, firms generally reflected on a fall in new orders, stemming from market uncertainty.

Cost pressures also intensified at the sharpest pace for over five years, with panel members linking this to the depreciation of the pound. In line with the trend for input prices, private sector companies operating in Scotland raised their selling prices further. Although the rate of inflation was the fastest since February 2014, it remained weaker than that for input costs.

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