Scotland’s private sector suffering from weak demand
The RBS purchasing managers index (PMI) highlights uncertainty over Brexit, a drop in customer confidence and a slowdown in markets, leading to a fourth month of contraction.
The index monitors conditions across the services and manufacturing sectors. A reading above 50 indicates expansion while a figure below 50 means contraction.
The seasonally adjusted headline Royal Bank of Scotland PMI edged marginally higher in March to 49.6, from 49.4 in February. Nevertheless, the headline figure was still indicative of a deterioration in the level of Scottish business activity.
The survey said: “Weighing on business performance was weak demand, as new orders continued to decline in March. Subsequently, firms devoted more resources to clearing outstanding workloads and remained cautious towards job creation, with employment ticking up only mildly. As part of efforts to remain competitive, some companies discounted prices, leading output charge inflation to ease to a 16-month low in March.”
Malcolm Buchanan, chairman, Scotland, Royal Bank of Scotland, commented: “Hesitancy among clients, Brexit-related uncertainty and general underlying demand weakness were factors firms attributed to sluggish sales and weaker business activity during March.
“Furthermore, latest survey data also revealed more caution towards recruitment. Amid reports of rising labour costs, employment levels were relatively flat, reflecting subdued demand faced by Scottish businesses. To improve competitiveness, some firms discounted their prices, pulling output charge inflation down to a 16-month low.
“Nevertheless, optimism towards the coming 12 months picked up slightly, as firms anticipate client confidence to improve once the uncertainty in the economic and political climate diminishes.”