THE downturn in Scotland’s private sector eased noticeably in July, with clear signs that the economy is approaching stabilisation, according to the latest figures from the Royal Bank of Scotland.
The monthly PMI – Purchasing Managers’ Index – showed that the seasonally adjusted headline Royal Bank of Scotland Business Activity Index – a measure of combined manufacturing and service sector output – registered 49.3 in July, rising from 37.1 in June.
This signalled the softest fall in private sector output since the current downturn began in March. New business declined only fractionally, while the 12-month outlook for activity strengthened to a five-month high.
July data highlighted a further reduction in new business at Scottish private sector firms, extending the current sequence of decline to five months. The seasonally adjusted New Business Index rose a further 12.7 points and neared the stabilisation threshold, however, with some respondents noting that looser lockdown restrictions had led to a slight improvement in demand conditions. The total gain in the index following April’s nadir is now nearly 38 points. At the sector level, manufacturing order books rose solidly, although services firms registered a fifth successive reduction in new work.
Sentiment with regards to activity over the year ahead remained positive for a third consecutive month and the level of confidence among Scottish firms strengthened to a five-month high. Anecdotal evidence linked optimism to hopes of an economic recovery once lockdown measures are lifted.
A sixth consecutive reduction in Scottish private-sector employment was recorded in July. Temporary business closures and weak demand conditions amid the Covid-19 pandemic were frequently cited as reasons behind the latest fall, although there were further mentions by panellists of use of the Government furlough scheme.
The rate of job shedding was the slowest since February, but still marked overall.
The fall in staffing numbers was broad-based at the sector level with services again registering the sharper decline, although both segments saw the rate of job shedding ease from June. Scottish private sector firms signalled a back-to-back rise in input prices in July, with the increase accelerating to a sharp pace. Greater fuel, staff and general overhead costs, as well as higher charges at suppliers were the main drivers of inflation, according to respondents. A fifth successive reduction in average charges levied by Scottish private sector firms was recorded. Panellists linked the fall to discounting amid intense competitive pressures due to the pandemic. There were also mentions of reduced selling prices in line with the lower VAT rate.
Malcolm Buchanan, chair of the Scotland board at Royal Bank of Scotland, said: “July data highlighted some encouraging signs that the Scottish private sector is approaching stabilisation.
“There were further reductions in activity and inflows of new business, but the declines were the softest since March and only slight. Firms also remained optimistic with regards to output over the coming 12 months. Confidence was the highest since February, with panellists linking positive expectations to hopes of an economic recovery.
“Although July’s figures are a significant step in the right direction, we are yet to see growth. A possible ‘second wave’ of the pandemic and return of lockdown in regions such as Aberdeen could derail any further moves towards a recovery.”
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here