Scottish private sector grew at start of 2016

Alasdair Gardner. regional managing director at the Bank of Scotland
Alasdair Gardner. regional managing director at the Bank of Scotland

The Scottish private sector remained in growth territory during the first month of 2016, according to the Bank of Scotland’s Purchase Managers Index (PMI).

Output expanded for the second successive month in January, albeit marginally, with the latest upturn driven by a faster rise in new business volumes.

However, firms continued to cut back on employee numbers, with the rate of job shedding accelerating to the fastest since July 2015. Despite a rise in new orders and business activity, volumes of outstanding business deteriorated for the thirteenth successive month.

The seasonally adjusted headline PMI - a single-figure measure of the month-on-month change in combined manufacturing and services output - scored 50.3 in January, unchanged from December’s 2015 reading.

The latest weak expansion in output was led by Scotland’s service providers, while goods producers reported a contraction.

Average cost burdens faced by businesses operating in the private sector of Scotland remained unchanged during January. This was the first time input prices had not risen since December 1998.

With input costs remaining unchanged, firms cut their average tariffs during the first month of 2016. There was evidence that lower output prices reflected competitive pressures in the sector.

Alasdair Gardner. regional managing director at the Bank of Scotland, said: “Growth in Scotland’s private sector remained in a low-gear during the first month of 2016 as service providers continued to outperform their manufacturing counterparts.

“Challenging market conditions in the oil and gas sector allowed for only a slight rise in incoming new business levels whilst job shedding accelerated to a six-month high.

“Firms reported a further lack of pressure on capacity throughout the private sector, yet this was not enough to halt the current upturn in the Scottish economy.”

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