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Scotland private sector economy expanded solidly

Staff Writer |
According to the latest Royal Bank of Scotland PMI, output in Scotland's private sector economy expanded solidly at the start of the fourth quarter.

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New orders increased at a stronger pace, while extra recruitment facilitated a reduction in backlogs of work.

Sharper cost pressures were reported, although output prices were increased to the softest extent in ten months.

Meanwhile, confidence towards future output volumes dipped to a one-year low amid uncertainty surrounding future UK-EU relations.

The seasonally adjusted headline Royal Bank of Scotland PMI was unchanged from the previous month in October, posting 53.4.

This signalled a solid expansion in private sector output and one that was sharper than that for the UK as a whole.

Sector data indicated that the expansion was broad-based, although service companies observed a noticeably stronger rise in business activity than their manufacturing counterparts.

Greater inflows of new work were recorded during October, with new orders increasing at a broadly similar pace to business activity.

Furthermore, the latest increase was the strongest of all 12 monitored UK regions.

New contract wins, promotional efforts and new product offerings supported the sales growth.

That said, the upturn was driven by the service sector, with goods producers noting a second successive deterioration in demand conditions.

To accommodate for demand pressures, service providers raised staffing levels moderately in October.

With manufacturers scaling back on employment only slightly, the net result was a modest increase in overall private sector workforce numbers during October.

The overall rate of job creation was, however, the fastest in four months and outpaced the UK average.

Lower order book volumes at manufacturers and stronger recruitment at service providers contributed to a slight reduction in outstanding business in Scotland during October.

Survey data signalled that Scottish private sector companies were able to cope with current business demands.

Overall, outstanding workloads were unchanged since August.

Pressures on margins were sustained during the latest survey period, with input costs rising to a sharp degree.

Sterling weakness, rising raw material prices and greater labour costs were all cited as sources of inflation.

Companies reacted to higher cost burdens by raising their charges.

Despite observing lower sales, manufacturers increased their prices at a sharper rate than service providers.

Nonetheless, the overall rate of charge inflation was the slowest in ten months.

Looking ahead, business confidence was maintained, however the level of optimism dipped to a one-year low as ongoing Brexit uncertainty reportedly hampered sentiment.

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