RBS survey

Service sector provides ‘lopsided’ lift in output

Exchange district
Scotland’s output was boosted by the services sector (pic: Terry Murden)

Private sector output expanded for a third consecutive month in March though it has been “lopsided” in favour of the service sector.

The Royal Bank of Scotland’s purchasing managers index for the manufacturing and service sectors rose in Scotland from 52.1 in February to 53.6.

It indicated the most pronounced expansion in 11 months with only London and Northern Ireland recording stronger rates of growth.

However, underlying data noted a continued divergence between the two sub-sectors. While business activity rose across service providers at the sharpest pace since June 2022, the downturn in manufacturing production entered its ninth successive month and deepened since February.

Judith Cruickshank, who chairs the Scotland Board at RBS, said: “The health of the Scottish private sector continued to improve as the first quarter drew to a close.

“However, the growth recorded was solely garnered on the back of the fast-expanding service sector.

“Meanwhile, the production segment of the economy remained a challenge. The lopsided nature of the expansion injects some concern over future growth.

“Divergent trends were also seen in terms of employment, which increased in services but decreased solidly across manufacturing.”

The latest data indicated that confidence levels at Scottish private sector companies rose for the second consecutive month to a 13-month high. The positive year-ahead outlook was spurred by plans of increased investment and advertising, as well as hopes of improving underlying demand conditions.

Nonetheless, sentiment across Scotland was the second-weakest of all the monitored UK regions and nations, with only the North East of England anticipating softer growth in activity.

The seasonally adjusted Employment Index was above the 50 neutral mark for the fourteenth month running in March, pointing to a rise in employment at Scottish firms.

Where staffing levels were raised, anecdotal evidence pointed to growing business requirements and the successful replacements of leavers. That said, the rate of job creation was among the weakest amid a softer rise in services employment and a fresh and solid decline at manufacturers.

Despite the slowdown in hiring activity across Scotland, the rate of growth managed to outpace that seen at the UK level.

Cost burdens rose across Scotland during March. Higher prices from suppliers, in part linked to the Red Sea crisis, and rising energy, material and labour costs were attributed to the latest rise in cost burdens.

Scottish private sector firms raised their selling prices in March. According to panellists, output charges were increased as a result of higher input costs.

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