Activity in Scotland’s private sector economy expanded at a solid pace, increasing slightly since May according to the latest Bank of Scotland PMI. However, with new business increasing only marginally for the second consecutive month, job creation stalled. Meanwhile, cost pressures eased further, in part leading to the weakest rise in output prices so far this year.
Private sector output expanded in June for the sixth month in succession. With growth of activity picking up in both the services and manufacturing sectors since May, the headline seasonally adjusted Bank of Scotland PMI climbed to 53.3 from 52.2 in May, and was also above the long-run series average.
Despite reporting the first fall in new business for six months, Scottish service providers continued to expand activity solidly and at a slightly faster pace than their goods-producing counterparts. Growth of output in the manufacturing sector was only moderate, but above the long-run series average nonetheless. A marginal rise in new orders in manufacturing offset the fall in new business reported by the service sector.
Lacklustre demand resulted in only a marginal rise in employment in June. Furthermore, with the exceptions of Northern Ireland, Wales, and Yorkshire & Humber – where headcounts either decreased or were unchanged – Scotland saw the slowest rate of job creation of all surveyed UK regions. Nevertheless, employment has now been rising for five months in a row.
Reflecting trends in new business received, staff numbers in the service sector fell slightly in June, but increased in the manufacturing sector, albeit only marginally. This expansion of capacity enabled goods producers to reduce levels of outstanding business at a relatively solid rate, and faster than Scotland’s service providers.
Input cost inflation cooled again in June, dipping to another low for the year so far. That said, growth of purchase prices in Scotland remained sharp and above the UK-wide average. According to anecdotal evidence, the key drivers of cost increases were fuel and utilities.
In line with slower cost growth, output price inflation eased further in the latest survey period. This primarily reflected only a modest increase in tariffs by service providers.
Donald MacRae, Chief Economist at Bank of Scotland, said: “June saw the sixth consecutive month of growth this year in the private sector of the Scottish economy with growth in both the manufacturing and services sectors. However, marginal growth in new business and job creation suggest business is going through a “soft patch” with subdued growth in the second quarter of this year decelerating below that of quarter one.
“Input cost pressures are abating. However growth of purchase prices remained sharp primarily due to cost increases for fuel and utilities. Trends in the service sector changed little since May, with activity in business services and travel, tourism & leisure expanding, while financial services contracted for a second month running. Growth in travel, tourism & leisure was the strongest since August 2007.”
Source : Bank of Scotland
