Scottish private sector job creation quickens

Workforce numbers rose across Scotland’s private sector again in May, extending the current run of expansion to 14 months, according to the latest Royal Bank of Scotland Purchasing Managers Index (PMI) report from S&P’s IHS Markit.

“Moreover, the rate of job creation quickened from April to the sharpest since last October,” said the report.

“According to panellists, higher customer demand and greater business requirements led companies to increase their headcounts, with both manufacturers and service providers noting increased staffing levels.”

However, the data indicated a softer expansion of private sector output across Scotland in May, with the seasonally adjusted headline Royal Bank of Scotland Business Activity Index — a measure of combined manufacturing and service sector output — falling from 58.9 in April to a three-month low of 55.9 in May.

“Slower increases in output were seen across both manufacturing and service sectors, with the former noting the slower rate of growth overall,” said the report.

“Meanwhile, total new work increased at the softest pace for four months, which was partly due to a renewed fall in new business at goods producers.

“On a more positive note, overall employment rose at the fastest pace since October 2021 amid a stronger upturn in backlogs of work.

“May data signalled a rise in total new orders placed with private sector firms in Scotland.

“The upturn was driven by a strong increase in sales at service providers, as manufacturers noted a renewed fall in new business.

“As a result, composite new orders expanded at the softest rate for four months, albeit one that was solid overall.

“Where a rise was seen, firms often noted improved market conditions and an ongoing recovery from the pandemic, which had helped to lift customer demand and support new client wins.”

Malcolm Buchanan, Chair, Scotland Board, Royal Bank of Scotland, said: “May data showed a further expansion of output across the Scottish private sector, but growth softened from the 11-month high seen in April.

“The loss of momentum was reflective of slower increases in activity across both the manufacturing and service sectors, with the former seeing only a marginal upturn in output.

“Nonetheless, respondents continued to report improving market conditions and strengthening demand, which in turn boosted activity.

“Moreover, the sustained uptick in new orders and efforts to expand capacity helped to drive the fastest increase in employment for seven months.

“Ongoing shortages of materials and supply bottlenecks contributed to a further rise in work outstanding, and also drove up prices.

“Overall inflationary pressure remained intense, with both input costs and output prices rising at near-record rates in May.

“Downside risks to the economy loom large, with increased global economic uncertainty and surging costs among key headwinds.

“Although companies generally anticipate economic activity to continue to recover over the next 12 months, overall sentiment remained weaker than that seen across the UK as a whole.”