Business activity improves for 14th consecutive month, RBS figures show

Business activity improved for the fourteenth consecutive month in April, but leaders are concerned about rising inflation, according to the latest figures from the Royal Bank of Scotland (RBS).

The monthly purchasing managers index (PMI) for April showed that the RBS business activity index rose to 58.9 – up from 58.4 in March.

Positive indicators were supported by a strong upturn in manufacturing production. An expansion in services activity was recorded again.

Scotland’s private sector also noted a rise in new business received during April, with client demand rising with the reduction in Covid restrictions.

Business leaders also have strong optimism, with respondents reporting they felt positive about expectations over the next year with hopes of an economic recovery.

However, optimism is still at an 18-month low and is below the UK-wide average as firms grow concerned about rising inflation.

Firms took on more workers during April but the pace of job creation has eased to the joint-softest in the last year.

Businesses are building capacity to cope with the current and anticipated future demand. Employment growth in Scotland was, however, firmly below the UK average.

Companies also reported additional cost burdens in April due to higher labour costs, fuel, food and energy prices.

Malcolm Buchanan, chairman, Scotland Board, Royal Bank of Scotland, said: “Scotland’s private sector improved strongly during April as business activity increased at the fastest rate for almost a year.

“Although growth momentum waned slightly across the service firms, the increase was sharp as firms continued to reap rewards from reduced Covid-19 restrictions.

“Meanwhile, goods producers saw an upturn in output and order book volumes after experiencing a downturn in March.

“Inflationary pressures continued to build and were further aggravated by ongoing supply chain issues.

“According to the evidence, higher raw material, fuel, energy and labour costs resulted in the steepest increase in input prices on record.

“Subsequently, charges were also raised to the greatest extent ever seen by the survey as firms sought to cover rapid cost inflation.

“The level of confidence slipped the lowest in 18 months as firms raised their concerns about the economic impact of inflation.

“Nevertheless, it still indicated a robust level of optimism as many firms were hopeful of activity growing in the coming 12 months.”