ACCORDING to the latest Royal Bank of Scotland PMI® survey, private sector activity grew at a strong and quickened pace at the start of the second quarter. The headline Business Activity Index ticked up for the third month running, posting a ten-month high of 54.3, up from 52.9 in March. According to surveyed firms, increased customer activity was key to the latest upturn in Scottish private sector output. New orders also increased for the third month running. That said, the rates of growth across Scotland for both variables were weaker than those seen at the UK level.
Scotland’s private sector firms were largely optimistic regarding the 12-month activity outlook in April. Companies were hopeful that improved demand conditions, business expansions, increased advertising and the launch of new projects would help support future growth in activity. However, the respective index printed a three-month low due to a notable weakening of confidence at goods producers.
Scotland was the second-least confident part of the UK, ahead of Northern Ireland.
Employment in Scotland’s private sector grew strongly in April, thereby extending the current sequence of increase to three months. Moreover, the pace of job creation accelerated to the joint-fastest in since October 2021. Firms raised hiring to meet growth in new volumes of work, anecdotal evidence showed.
Additionally, after Northern Ireland, Scotland registered the second-strongest rise in payroll numbers across the UK.
Following ten successive months of falling backlogs, private sector companies across Scotland registered a rise in the level of unfinished work during April. At the sector level, the increase in backlogs was driven by a renewed rise at service providers, who linked the latest uptick to growing business activity as well as recruitment difficulties.
At the UK level, no change in backlogs since the previous survey period was recorded.
Input prices continued to rise sharply and at an accelerated pace in April. The rate of input price inflation was the strongest in three months and historically elevated. Surveyed businesses largely attributed rising expenses to higher food, energy and supplier costs as well as increased wages.
The pace at which cost burdens grew across Scotland was stronger than that at the UK level.
Subsequently, private sector companies across Scotland also raised their charges for goods and services at the sharpest pace since January. Both manufacturers and goods producers increased their selling prices at faster rates. That said, the overall pace of output price inflation across Scotland was softer than the UK average.
Judith Cruickshank, Chair, Scotland Board, Royal Bank of Scotland, commented:
“Private sector companies across Scotland recorded further rises in activity and new business during the latest survey period, with the former expanding at the quickest pace in ten months. The positive trends also prompted firms to up their hiring activity. Payroll numbers have risen in each month since February, with the latest round of job creation the joint-strongest in one-and-a-half years. Despite the increase in payroll numbers, the level of unfinished work grew following ten consecutive months of decline, suggesting renewed pressure on capacity. Looking ahead, sentiment among private sector firms towards future output was the weakest in three months but remained stronger than the historical average, with expectations of improved demand conditions to support output growth.
“Elsewhere, the data pointed to stubborn price pressures. Input and output price inflation both ticked up to three-month highs in April, though they remained below their 2022 peaks.”
