Scots private sector shows ‘further rapid expansion’

The Scottish private sector ended the second quarter of 2021 with further rapid expansion, according to the latest Royal Bank of Scotland Purchasing Managers’ Index (PMI) as looser Covid-19 restrictions continued to spur growth.

A third straight monthly increase in the level of new business at Scottish companies was recorded during June.

The seasonally adjusted headline Royal Bank of Scotland Business Activity Index — a measure of combined manufacturing and service sector output — posted 58.4 in June, falling from May’s survey record of 61.5, to signal the second-quickest increase in output since data collection began in 1998.

Inflows of new work rose steeply again, while sustained capacity pressures led firms to take on additional staff for the third month in a row.

Inflationary worries worsened, however, with input prices rising at the quickest pace for over a decade and firms raising their selling prices at a record pace as a result.

The relaxation of Covid-19 restrictions, improved client confidence and firmer demand conditions were all cited by panellists as drivers of the latest upturn.

The rate of growth slowed from May’s survey high, but was still the second-quickest since September 2013 and rapid.

The latest increase in new business was broad-based at the sector level and led by services, with goods producers seeing the rate of growth slow on the month.

Private sector employment across Scotland continued to rise during June, extending the current sequence of increases to three months.

The latest upturn in staffing levels was attributed by panellists to greater output requirements.

The rate of job creation slowed from May’s peak, but was still the second-quickest on record and sharp overall.

The increase in workforce numbers was broad-based across both monitored sectors during June. Services saw a slightly quicker rate of job creation than manufacturing.

June data pointed to sustained capacity pressures at Scottish companies, as the level of outstanding business rose for the third month in a row.

Surging sales due to looser Covid-19 restrictions, as well as supply disruptions and shortages, meant firms were unable to keep up with activity requirements, according to anecdotal evidence.

Malcolm Buchanan, Chair, Scotland Board, Royal Bank of Scotland, said: “June data showed some signs of optimism for the Scottish private sector, as the easing of lockdown restrictions and improved consumer confidence continued to invigorate growth.

“The rates of increase in both business activity and new work slowed only slightly from May’s respective series records and remained marked.

“Inflationary pressures are a key concern, however, as material shortages and greater fuel and utilities fees continued to put severe upward pressure on input costs and, subsequently, selling prices.

“Nonetheless, the private sector remains in a good position as we enter the third quarter of the year.

“Growth showed little sign of slowing notably in June, and firms remained among the most confident on record of higher activity in the coming 12 months.”