Scots private sector shows another ‘sharp uplift’

Scottish private sector companies registered a further sharp uplift in business activity during September, according to the latest Royal Bank of Scotland PMI report from IHS Markit.

The third quarter as a whole saw one of the quickest expansions of the Scottish private sector on record.

The September data highlighted a sustained rise in Scottish private sector employment, stretching the current sequence of increases to six months.

The rate of job creation accelerated to a four-month high and was sharp overall.

Scotland also registered the third-quickest increase in employment across the 12 monitored UK areas in September, behind only London and Wales.

However, cost burdens rose at the fastest pace in over 13 years, while the rate of “charge inflation” hit a record high.

The seasonally adjusted headline Royal Bank of Scotland Business Activity Index — a measure of combined manufacturing and service sector output — posted 56.1 in September to signal a seventh straight monthly expansion in output, and one that was sharp overall.

“The latest figure was down from 58.1 in August, however … as a sustained upturn in services was slightly offset by a renewed fall in manufacturing output,” said the report.

“Overall new business continued to increase, but saw a similar moderation in the rate of expansion.

“Meanwhile, cost burdens rose at the fastest pace for over 13 years, while the rate of charge inflation hit a record high.

“For the sixth time in as many months, inflows of new work to Scottish private sector firms rose during September.

“Panellists linked the latest uplift in new orders with strong client demand, in part due to the relaxation of lockdown restrictions.”

Private sector firms across Scotland maintained an optimistic outlook towards business activity over the coming 12 months during September.

That’s despite the latest report showing that a 16th consecutive monthly rise in costs facing Scottish private sector firms was recorded in September.

“Greater material, fuel and wage costs, logistical issues, COVID-19 and Brexit were all cited as drivers of cost inflation,” said the report.

“Moreover, the rate of increase was the fastest since July 2008 and rapid.

“At the sector level, goods producers continued to see a far stronger rise in input prices than service provider, although the rate of inflation at the latter still hit a 13- year high.

“Scottish private sector firms subsequently raised their average charges for the eleventh month in a row during September.

“Panellists attributed the latest uptick to the partial pass-through of greater costs to clients. The rate of charge inflation was the fastest in the series history (since November 1999).

“Both monitored sectors recorded a faster increase in prices charged during September, with manufacturing continuing to record the steeper rate of inflation.”

Malcolm Buchanan, chair, Scotland Board, Royal Bank of Scotland, said: “Scotland’s private sector remained on a growth footing in September, with business activity rising further amid a sustained uplift in inflows of new work.

“The rates of expansion slowed to a five-month low, however, as some momentum was lost due to fresh reductions in both output and order book volumes at goods producers.

“At the same time, companies registered severe inflationary pressures, with cost burdens increasing at the quickest rate since 2008 amid reports of greater fuel, material and staff costs, as well as shortages and logistical issues.

“As a result, firms raised their average charges to a degree unseen since this series began in late-1999.

“Although the latest data does indicate a slight slowdown in growth, the third quarter as a whole nonetheless saw one of the quickest expansions of the private sector on record and it remains in a strong position as we enter the closing months of the year.”