Scottish private sector growth remains subdued at end of second quarter

Scotland’s private-sector saw a slight increase in output in June, according to latest data from the Bank of Scotland.

The bank’s purchasing managers’ index (PMI) data for last month showed growth in the service sector remained unchanged since May while manufacturing expanded at a slower rate.

The seasonally adjusted headline PMI - a single-figure measure of the month-on-month change in combined manufacturing and services output - fell to 51.1 in June, from 51.5 in May. This signalled modest output growth that was below the survey’s historical average.

Activity growth in the service sector remained unchanged since May, whereas the manufacturing sector expanded at a slower rate.

On the price front, both input and output price inflation eased slightly in June, though the former remained high overall.

At the sector level, manufacturers increased their output at a steady pace overall. Although the rate of expansion eased since May, production growth remained higher than that of business activity in the service sector.

There was a return to growth of employment in June. Job creation was consistent across both sectors, and faster among manufacturing companies. Scottish employment growth remained weaker than that seen across the whole of the UK, however.

Despite reducing slightly, input price inflation remained strong in the latest survey. Furthermore, the rate of increase in cost burdens was above the long-run average. There was some evidence linking rising input costs to pay pressures and the weak pound.

Fraser Sime, regional director, Bank of Scotland Commercial Banking said: “Scotland’s private sector output growth reduced slightly at the end of the second quarter. Manufacturing, which was previously a key driver behind private sector growth, softened in June. The services sector remained subdued overall and with an unchanged rate of expansion since May.

“However, there was also some positive news. Employment returned to growth and input price inflation further decreased in the latest survey. In addition, June’s data extended the current sequence of expansion to seven months, the longest recorded for almost two-and-a-half years.

“Finally, business confidence fell in June, although to a lesser extent than seen across the UK as a whole.”

Economy Secretary Keith Brown said: “The latest Bank of Scotland PMI figures signal expansion in Scotland’s private sector in every month, for the first half of this year. The survey also signals that companies across Scotland have seen increased employment numbers alongside new business and order growth. Business sentiment remains positive with future output expectations on the rise.

“It is a further vote of confidence in the Scottish economy, coming on the back of GDP figures that show growth four times that of the UK figure over the first three months of the year, with unemployment also at a record low of 4%.

“While this is encouraging, Brexit uncertainty continues to cast a shadow over the future economic outlook, threatening jobs, investment and living standards. The Scottish Government will continue to use all of the powers at our disposal to grow the Scottish economy.”