Firms’ output stalls despite manufacturing pick-up

Scotland’s private sector economy “approached stagnation” in February despite renewed growth in manufacturing, according to a survey.

The latest Royal Bank of Scotland purchasing managers index (PMI) found an expansion in production was offset by a mild decline in services activity.

Firms also reported the first drop in workforce numbers since October, although the fall was mild overall.

Panellists attributed that to leavers not being replaced, and weaker demand.

The bank’s business activity index, which measures manufacturing and service sector output, posted 50.1 in February, down from 52.0 in January.

Any figure above 50 suggests expansion.

Overall new business increased for the second month running, although the uptick eased to only a fractional pace.

Some panellists reported that weak foreign demand and uncertainty had weighed on growth.

Moreover, of the 11 monitored UK areas to report an increase in new business in February, Scotland recorded the joint-softest rise with the north east of England.

Meanwhile, firms expressed greater confidence that activity would rise over the coming 12 months.

Panellists linked their optimism to expectations of stronger demand conditions, positive growth forecasts and subsiding political uncertainty.

The level of positive sentiment was the highest since June 2018. However, it remained the second lowest across the 12 monitored UK areas, with only Northern Ireland reporting a softer outlook.

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