finance

Scottish private sector output increases as lockdown restrictions ease



The easing of lockdown restrictions led to an increase in output from the Scottish private sector during May, according to the latest figures from Royal Bank of Scotland.

Its Business Activity Index recorded a measure for combined manufacturing and service sector output at 61.5 in May, up from 55.4 in April.

The data is compiled from responses to questionnaires sent to companies that participate in IHS Markit’s monthly PMI surveys. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

The rate of growth recorded last month was the steepest since the survey began in January 1998.

Respondents mainly linked higher activity to the loosening of lockdown restrictions, with new business also increasing at an “unprecedented pace”.

Companies increased employment to deal with the higher workloads, to an extent previously unseen in the survey’s history.

However, inflationary pressures strengthened, with both input costs and output prices rising at sharper rates. The rate of charge inflation in Scotland was softer than the UK average.

Strong growth of new orders was recorded across the UK in May. The rise in Scotland was the second-slowest of the 12 UK regions covered, despite being at a record high.

Business confidence in Scotland also improved to a new record high midway through the second quarter of the year, with optimism signalled at manufacturers and service providers alike.

The further easing of Covid-19 restrictions over the coming months was behind confidence in the year ahead outlook.

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The data suggests a hiring surge from the private sector as some businesses reopened and others responded to sharp increases in workloads.

The rate of job creation accelerated and was the fastest on record, surpassing the previous high from February 2014. The rise in Scotland was also slightly stronger than the UK average.

Sector data showed a resurgence in services staffing levels, which rose for the first time in 16 months and at a record pace. The rate of manufacturing job creation meanwhile hit a near seven-year high.

Backlogs of work increased for the second month running, and at a marked pace that was the fastest since the series began in November 1999.

The rate of inflation increased for the third month running and was the quickest since July 2008. In line with the pattern for input costs, manufacturers posted a steeper rise in selling prices than services companies.

Malcolm Buchanan, chair of the RBS Scotland board, commented: “Growth in the Scottish private sector hit unprecedented levels in May amid a further loosening of lockdown restrictions and strong confidence in the year-ahead outlook.

“Business activity, new orders and employment all increased at the sharpest rates since the survey began in January 1998 – encouragingly, services employment rose for the first time in 16 months.

“The strong expansion in workloads was accompanied by an intensification of inflationary pressures, with sharper increases in both input costs and output prices. Inflation was particularly strong in the manufacturing sector amid soaring global commodity prices.”

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