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Private sector expansion slows down, Bank of Scotland report shows

Published 14/11/2016

Manufacturers reported marginal growth in business activity levels in October, according to a report
Manufacturers reported marginal growth in business activity levels in October, according to a report

The country's private sector expanded at a slower rate last month, burdened by higher input prices and stagnating new business, a new report shows.

The Bank of Scotland PMI showed that output growth weakened, new business levels stagnated and volumes of incomplete work deteriorated in October.

The stagnation in new order intakes followed a marginal expansion the previous month.

Manufacturers and service providers both reported marginal growth in business activity levels.

However, companies continued to add to their payrolls despite facing the sharpest increase in input costs since September 2011.

Nick Laird, regional managing director at 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.

"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."

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 which was at 50.6 in October.

However, this was down from 51.2 in September, pointing to a "softer overall upturn".

Readings above 50 signal an increase or improvement while readings below 50 signal a decline or deterioration.

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.

Meanwhile, job creation continued in Scotland's private sector for a third successive month.

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.

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