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Output falls for fifth time in six months as new orders slow down



Private sector output in Scotland has fallen for the fifth time in six months, according to the Royal Bank of Scotland PMI.

The decline in May reverses the modest pick-up seen in April.

New orders also declined, but prices increased due to cost pressures including higher labour costs as firms continued to recruit.

 

The seasonally adjusted headline Royal Bank of Scotland Business Activity Index – a measure of combined manufacturing and service sector output – fell to 48.9 in May, from 51.0 in April.

Manufacturers recorded a small expansion in production but there was a fall in service sector output.

Scotland’s output fell quicker than any other Uk region except Northern Ireland.

The decrease in new orders was caused by weak market confidence and lower demand from overseas. Both manufacturers and service providers registered lower sales.

Employment increased slightly for the 15th consecutive month.

Input prices increased at the quickest pace since last October, with the rate of output price inflation at a one-year high.

The degree of confidence lagged behind the UK average, caused by Brexit uncertainty and forecasts of weaker growth. 

Malcolm Buchanan, chairof the RBS Scotland Board said: “Private sector business activity was dragged back into contraction by a weaker service sector in May, reversing the rebound seen in this part of the economy which helped reinstate overall growth in Scotland in April.

“For the fifth time in six months, new orders fell. Panellists attributed order book contraction to weak overseas demand and reduced confidence within the local economy.

 

“Brexit-related concerns and fears of slowing economic growth north of the border remained prominent, ultimately keeping business confidence subdued and below the UK average.”

RBS chief economist Sebastian Burnside added: “Business activity moved back into negative territory in May, dragged down by weaker service sector output. New orders fell last month but jobs growth persists albeit modest”.



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