New business falls in Scotland

Highlighting a further dip in the pace of growth of total activity in September, the seasonally adjusted Bank of Scotland PMI fell from 52.7 in August to 51.9 - its lowest posting in the current nine-month sequence of expansion.

The latest slowdown primarily reflected weaker growth of goods production compared with August. That said, manufacturing output continued to expand solidly, and at a slightly faster pace than service sector activity.

Further jobs were lost as a result of the downturn, although the pace of staff cutting remained only slight. Stalling demand also meant that, despite sharp cost pressures, tariffs rose only modestly on average during the latest survey period.

Anecdotal evidence attributed the overall slowdown to a first (albeit moderate) fall in new business since December. The decrease in new work was underpinned by lower demand at services providers, while firms operating in the manufacturing sector registered broadly no change in new orders.

Employment across Scotland's private sector fell for the second month in a row in September. Staff cuts were confined to the service sector, where jobs were lost at a rate broadly unchanged since August. Cushioning the drop in total employment was a solid rise in headcounts at manufacturers - the sharpest for four months.

Reflecting a disparity between trends in production and new orders in September, outstanding business fell solidly. The decrease in backlogs was the steepest since April and underpinned by a marked reduction in work-in-hand at service providers. Manufacturers registered only a slight drop in outstanding business during the latest survey period.

With inputs such as energy, food and fuel reported as up in price by both service providers and good producers, cost inflation north of the border remained sharp in September. Moreover, Scotland saw the steepest monthly rise in input prices of all UK regions covered by PMI surveys.

Despite elevated cost pressure, charges on average increased only slightly in September, as tariff cuts in the service sector almost entirely offset a solid hike in average factory gate prices.

Donald MacRae, chief economist at Bank of Scotland, said: "Private sector activity in the Scottish economy increased for the ninth month running in September.

“However, the month-on-month growth was the slowest since the start of the year. Both jobs and new orders fell in the month but new export orders saw a modest increase. Manufacturers increased output at a solid rate despite strong cost pressures.

“This month's PMI suggests the Scottish economy continues to grow but is slowing in common with the rest of Europe."