This is according to the latest Royal Bank of Scotland PMI (Purchasing Managers’ Index) which pointed to a renewed rise in business activity across the Scottish private sector at the beginning of this year, climbing to 51.7 from December’s 49.4.
While this is the first positive trend in the last few months, the report points out that the growth was primarily driven by the services sector, as manufacturers reported a continued decline in production volumes. As a result, only the services sector increased staffing levels, while employment levels fell at manufacturers for the first time in four months.
“Growth was imbalanced, centred solely at services providers who have shown resilience amid a subdued economic climate,” continued Cruickshank. “Meanwhile, the manufacturing sector reported a further sharp deterioration.”
The Scottish private sector is also facing seven consecutive months of decline in new orders, however, the downturn rate is at its weakest since last July. Firms are attributing the stronger rise in inflows of new business to improvements in demand conditions, new clients, and increased advertising.
According to the report, the Scottish labour market remained resilient despite the drop in new orders, with employment rising for a year. This was driven primarily by the services sector, while goods producers registered a decline in staffing levels for the first time in four months.
The Scottish private sector also witnessed a ninth consecutive monthly decline in outstanding business, although the rate of depletion softened notably from December’s recent record. Rising fuel, energy, and salary costs, along with increased prices from suppliers, pushed up input costs across Scotland.
“Going forward, Scotland’s private sector maintains a healthy outlook for output in the coming 12 months. However, elevated inflation and interest rates as well as lingering economic uncertainty could undermine growth prospects,” concluded Cruickshank.