Private sector activity in Scotland expanded for the fifth month running in May and at the strongest pace in two years, according to the headline Royal Bank of Scotland Business Activity Index.
The seasonally adjusted index that measures the month-on-month change in the combined output for Scotland’s manufacturing and service sectors scored 55.2 in May, up from 53.8 in April.
A further acceleration in the rate of job creation across Scotland’s private sector was noted in May. Hiring activity was the strongest recorded in three months, owing solely to the increase in service sector employment.
Underlying data again showed that growth across Scotland’s private sector was achieved on the back of improving demand for services, which also helped mask the downturn observed in manufacturing.
As a result, jobs growth and backlog accumulation was limited to service firms.
Scottish businesses registered a fourth successive monthly rise in inflows of new work in May. The respective seasonally adjusted index ticked up to a three-month high and was broadly in line with the UK-wide average.
The upturn was again centred at service firms, where a quicker intake of new business helped offset a deepening downturn at manufacturers.
Surveyed service providers noted that better marketing strategies, new client wins and increased customer activity supported the latest uptick.
Businesses in Scotland remained optimistic towards growth prospects in the coming year in May. In fact, the degree of confidence strengthened on the month, with respondents citing plans for digitalisation and marketing, and hopes of improving demand conditions.
Judith Cruickshank, Chair, Scotland Board, Royal Bank of Scotland, said: “The Scottish private sector exhibited further gains midway through the second quarter.
“The upturn was contingent on the sustained rise in services activity which rose at a sharp and quicker rate and was vital in offsetting the shortfalls seen at manufacturers.
“Moreover, the divergence between the two sectors is set to persist as manufacturing new orders fell rapidly, while demand trends improved for services.
“May data also signalled a faster rate of job creation and a fresh rise in outstanding business. However, these upturns were again fuelled by the service sector.
“While the service sector looks set to expand in the coming months as expectations for future activity strengthens, the manufacturing sector will only hold back growth momentum, unless demand for goods picks up.”