Scotland business

PMI: Scottish business activity 'slips into contraction'

Factory worker Image copyright Getty Images

Output in Scotland's private sector contracted last month for the first time in more than a year, according to a report.

The latest Bank of Scotland PMI suggested there was a slight decline in new work for both manufacturing and service sector firms in December.

It was the first contraction since November 2016.

PMI panellists suggested sales were down because of a lack of confidence among customers.

However, shrinking order books did not discourage firms from hiring additional staff, with private sector employment expanding for the seventh consecutive month during December.

The PMI - which measures changes in combined manufacturing and services output each month - declined in December to 49.4, down from 50.2 the previous month.

Any figure below 50 suggests contraction.

'Intensified competition'

According to the latest report, service sector output contracted at the joint sharpest pace since January 2015, with firms attributing lower business activity to "intensified competition".

On the other hand, manufacturers raised production moderately, despite the pace of expansion softening from the previous month to a one-year low.

Meanwhile, companies indicated a further rise in input costs, reflecting a combination of higher wages, fuel costs and charges by suppliers.

In turn, firms raised their prices at a faster rate in order to pass on the higher expenses to their customers.

On a positive note, business confidence strengthened to a three-month high during December.

New product launches, planned company expansions and increased advertising were all cited as reasons to be optimistic.

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