Return to growth signalled as PMI rises to 14-month high in September

10 October 2016

  • Output returns to growth for first time since June

  • New business expands at fastest pace for 13 months

  • Input costs increase at sharpest rate since late-2013

Scotland’s private sector output increased for the first time in three months during September. The rate of expansion was the fastest for 14 months, as firms also recorded higher levels of new business and employment.

The Bank of Scotland Purchasing Managers’ Index (PMI) rose to a 14-month high of 51.2 in September, up from 49.1 in August. The latest figure ended a two-month period of contraction, as both manufacturers and service providers reported higher business activity.

Volumes of new business in Scotland’s private sector rose for the first time since June.

Meanwhile, jobs growth continued during September, albeit at a slower pace. A number of panellists linked the rise in headcounts to efforts to support the expansion in output.

On the price front, firms raised their selling prices at a slower pace despite facing the fastest increase in input costs for 33 months. 

Nick Laird, Regional Managing Director, Bank of Scotland Commercial Banking said, “An upturn in Scotland’s private sector was signalled in September, as the headline index rose to a 14-month high. The improvement in the economy was equally shared between service providers and manufacturers, who both registered modest increases in output during the month. Demand for Scottish goods and services also rose, highlighted by a rise in new business. On another note, firms faced the fastest increase in input costs for 33 months, putting pressures on firms’ margins as we approach the end of the year.

Component summary

Output / Business activity

Scottish service output returned to growth territory in September, ending a four-month sequence of decline. Moreover, the rate at which output grew quickened to the fastest in 14 months but remained relatively modest. Manufacturing output in Scotland increased for the second month in succession during September. However, the rate of growth eased since August and was only marginal.

New business

Latest survey data pointed to a rise in total new work in Scotland’s service sector, ending a two-month sequence of decline. The rate at which new business expanded was the sharpest for eight months and solid overall. Scotland’s manufacturers received higher new order volumes during September, ending a two-month period of contraction. That said, the latest rise was only marginal.


Scotland’s service sector firms reported a lack of capacity pressure during September, as their levels of outstanding business declined. According to anecdotal evidence, the decline reflected an increase in business activity. Meanwhile, outstanding business levels in Scotland’s manufacturing sector deteriorated for the twenty-eighth consecutive month during September. That said, the rate of decline eased since August and was slower than the series average. 

Input prices

Service sector companies operating in Scotland faced a further increase in their average cost burdens during September, extending the current sequence which has so far characterised the series history. There was some evidence that higher input costs reflected unfavourable exchange rate movements. Similarly, input costs faced by Scotland’s manufacturing companies increased for the fifth month in succession in September.

Output prices

Selling prices were increased by Scotland’s service providers for the second consecutive month in September. Furthermore, the rate of inflation was the sharpest in 24 months and slightly stronger than the long-run historical average. Scottish goods producers increased their output prices in September, lengthening the current sequence of inflation to three consecutive months. According to survey evidence, the depreciation of the pound led firms to increase their average charges.


Workforce numbers in Scotland’s service sector grew for a third consecutive month during September. Firms which added to their payrolls, generally associated this with a rise in new business intakes. Meanwhile, job growth continued in Scotland’s goods-producing sector during September. The rate of job creation was solid and quickened to a 22-month high. Rising employee numbers were linked by panellists with efforts to support the increase in output.