RBS: Scottish economy returns to growth in March

Scotland’s economy returned to growth during March, according to the latest Royal Bank of Scotland PMI.

The seasonally adjusted headline Royal Bank of Scotland Business Activity Index - a measure of combined manufacturing and service sector output - rose to 54.3 in March, up sharply from 44.1 in February to signal the first upturn in output since last September and one that was solid overall.

Meanwhile, inflows of new work were broadly stable on the month as looser restrictions buoyed demand in some sectors, while hopes of a swift economic recovery pushed business confidence to the highest on record (since mid-2012).

March also saw further signs of inflationary pressures, however. Input costs rose at the most marked rate since August 2018, amid reports of supplier shortages as well as additional Brexit and COVID-19 related costs. As a result, Scottish companies increased their charges at the quickest pace for nearly two years.

Following six straight monthly declines, inflows of new work to Scottish private sector firms were broadly stable in March, with the respective seasonally adjusted index posting only just below the neural 50.0 mark.

Where an increase was recorded, this was linked to looser lockdown measures and improved demand, although some panellists noted that the remaining measures were still stifling sales in several sectors. Across the 12 monitored UK areas, all nine English regions and Wales posted growth, while Northern Ireland registered a modest decline.

The 12-month outlook for activity among Scottish private sector companies improved for the fifth month in a row during March, with sentiment the strongest on record (since July 2012). Anecdotal evidence linked optimism to the planned easing of COVID-19 restrictions amid the ongoing vaccine rollout, hopes of improved client demand and a solid economic recovery.