Scots private sector growth at 11-month high

Private sector activity growth in Scotland accelerated to an 11- month high in April, according to the latest Royal Bank of Scotland Purchasing Managers Index (PMI) report from IHS Markit.

Business activity improved for the fourteenth consecutive month in April as the seasonally adjusted headline Royal Bank of Scotland Business Activity Index — a measure of combined manufacturing and service sector output — rose to 58.9 in April, up from 58.4 in March and indicating a faster increase in private sector output.

The latest uptick was supported by a strong and renewed upturn in manufacturing production, although a sharp expansion in services activity was recorded once again.

Moreover, the rate of growth across Scotland accelerated for the fourth consecutive month to the quickest since May 2021.

Scotland’s private sector noted a rise in new business received during April.

The increase in new business inflows across firms in Scotland was quicker than that seen at the UK level.

April data indicated strong optimism across Scottish private firms.

Survey respondents were largely positive with regards to activity expectations over the coming 12 months amid hopes of a continued economic recovery as COVID-19 disruptions subside, encouraging higher client demand and investment.

However, the degree of optimism across Scotland hit an 18-month low and posted below the UK-wide average as firms grew concerned about the economic impact of inflation.

Workforce numbers across Scotland’s private sector expanded for the thirteenth month running during April.

The rate of input price inflation was stronger in Scotland than that recorded for the UK as a whole in April.

“April data highlighted a steep increase in selling charges across Scotland’s private sector,” said the report.

“Outpacing the UK-wide average, the rate of output charge inflation quickened for the fourth month running to the sharpest on record.

“Firms stated that higher prices reflected efforts to offset the squeeze on their margins.”

Malcolm Buchanan, chair, Scotland Board, Royal Bank of Scotland, said: “Scotland’s private sector improved strongly during April as business activity increased at the fastest rate for almost a year.

“Although growth momentum waned slightly across the service firms, the increase was sharp as firms continued to reap rewards from reduced COVID-19 restrictions. Meanwhile, goods producers saw an upturn in output and order book volumes after experiencing a downturn in March.

“Inflationary pressures continued to build and were further aggravated by ongoing supply chain issues. According to anecdotal evidence, higher raw material, fuel, energy and labour costs resulted in the steepest increase in input prices on record.

“Subsequently, charges were also raised to the greatest extent ever seen by the survey as firms sought to cover rapid cost inflation.

“The level of confidence slipped the lowest in 18 months as firms raised their concerns about the economic impact of inflation.

“Nevertheless, it still indicated a robust level of optimism as many firms were hopeful of activity growing in the coming 12 months.”