12 March 2018


  • Private sector employment unchanged since January

  • Input price inflation eases, while output prices increase at quicker pace

  • Confidence weakens but remains relatively strong

Business activity in the Scottish private sector declined in February. New order receipts were broadly unchanged, discouraging firms from hiring new staff. With a lack of incoming new business, firms were able to dedicate extra resources to clearing backlogs of work. Optimism towards future output weakened but remained relatively strong.

The seasonally adjusted headline Bank of Scotland PMI® - a single-figure measure of the month-on-month change in combined manufacturing and services output - slipped back into contractionary territory in February, registering at 49.5 compared to 50.3 in January.

New business placed with Scottish private sector firms was largely unchanged in February. While manufacturers noted a decline amid weaker demand from both domestic and external clients, service sector firms signalled a fractional increase.

With falling output and lack of new business opportunities, private sector companies in Scotland left employment unchanged during February. Nonetheless, backlogs of work were reduced during February, marking a thirty-eighth successive month where capacity pressures have abated.

Despite unfavourable demand pressures, private-sector firms raised output prices. The rate of output price inflation accelerated to a nine-month high amid increased raw material prices. A steep rise in cost burdens was observed in February. Firms reported higher prices paid for fuel, food and metals. Although input cost inflation eased, it outpaced that of output prices, thereby signalling further erosion of profit margins.

Lastly, business confidence remained elevated in February, despite weakening. Firms linked their optimism to planned expansion into new markets.

Fraser Sime, Regional Director, Bank of Scotland Commercial Banking said:

“For the first time since July 2016, the downturn in Scottish private sector business activity was broad-based, with both goods producers and service providers signalling declines in output.

“Firms reported flat demand conditions, with new orders broadly unmoved from the previous month. Despite this, output price inflation accelerated to a nine-month high amid further hikes in operating costs.

Nonetheless, future output projections remained positive. Panellists reported plans to expand into new markets, as well as expectations of higher demand over the coming 12 months.”


The Bank of Scotland PMI® (Purchasing Managers’ Index®) is produced by IHS Markit. The report features original survey data collected from a panel of around 500 companies based in Scotland and operating in both manufacturing and service sectors. The panel has been carefully selected in order to accurately reflect the true structure of the Scottish economy and therefore provide an accurate picture of business conditions in the region. The Scotland survey forms part of a series of regional surveys and is derived from the highly regarded national PMI survey produced by IHS Markit.

Bank of Scotland PMI: Notes and Methodology

PMI surveys

Purchasing Managers’ Index® (PMI®) surveys are monthly surveys of carefully selected companies which provide an advance indication of what is really happening in the private sector economy by tracking variables such as output, new orders, employment and prices across both manufacturing and service sectors. The PMI surveys are based on fact, not opinion, and are the first indicators of economic conditions each month. The data are collected using identical methods in all countries and regions so that accurate comparisons may be made. Questionnaires are completed in the latter half of each month and are collected and processed by economists at IHS Markit. Respondents are asked to state whether business conditions for a number of variables have improved, deteriorated or stayed the same compared with the previous month.

Index numbers

Index numbers are calculated from the percentages of respondents reporting an improvement, no change or decline. These indices vary between 0 and 100 with readings of exactly 50.0 signalling no change on the previous month. Readings above 50.0 signal an increase or improvement; readings below 50.0 signal a decline or deterioration. Reasons given by survey respondents for any changes are analysed to provide insight into the causes of movements in the indices and are also used to adjust for expected seasonal variations. The indexes are seasonally adjusted to take into consideration expected variations for the time of year, such as summer holiday shutdowns and national holidays such as Christmas. IHS Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series. Purchasing Managers’ Index® (PMI®) surveys are now available for over 30 countries and also for key regions including the eurozone. They are the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to

About IHS Markit

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About Bank of Scotland

Bank of Scotland is part of Lloyds Banking Group, the UK's largest retail bank and Scotland's largest financial services employer. Established in 1695, Bank of Scotland is the UK's oldest surviving clearing bank. Our goal is to be the best financial services provider in Scotland. We believe this means we must build a leadership position not on the basis of scale but on the foundations of reputation and recommendation.

The intellectual property rights to the Bank of Scotland PMI® provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index® and PMI® are either registered trade marks of Markit Economics Limited or licensed to Markit Economics