Royal Bank of Scotland PMI report for July 2022

A summary of this month’s Royal Bank of Scotland Purchasing Managers’ Index report. Business activity growth weakened to a 17-month low in July.

Key findings

  • Output expanded fractionally amid a renewed drop in sales
  • Employment increased at the softest rate since April 2021
  • Price pressures cooled, but remained rapid

Moreover, new business at Scottish private sector firms fell for the first time since March 2021. Sector data showed that weakness generally emanated from the manufacturing sector, though service providers in the region saw rates of growth for both output and new orders had weakened since June.

Private sector firms across Scotland signalled a renewed fall in new orders during July. While the rate of reduction was only mild, it marked the first contraction since March 2021. The respective seasonally adjusted index was pulled down by a sharp reduction in factory orders across the region, while a weaker upturn in sales was seen at service providers. Panellists linked the decline to reduced customer spending amid the cost-of-living crisis and rising economic uncertainty.

In contrast to the contraction observed in Scotland, the UK as a whole reported a modest expansion in new orders.

Business confidence strengthened marginally across Scottish private sector firms in July. Surveyed companies hope that new customers and improvements in client spending will lead to expansions in activity in the coming 12 months. Nevertheless, the overall degree of optimism was the second lowest in 21 months, with a number of firms concerned about the challenging economic climate, the cost of living and the potential recessionary risks. 

Additionally, Scottish private firms were less upbeat than the average UK business.

Malcolm Buchanan, Chair, Scotland Board, Royal Bank of Scotland, commented: “The Scottish private sector lost growth momentum for the third month running during July. Activity levels were broadly unchanged as the post-pandemic rebound continued to fade and firms faced intense cost pressures and greater economic uncertainty. Manufacturing firms in the region noted sharp declines in production and new orders, while service providers reported only mild expansions in activity and sales. 

“Encouragingly, employment continued to rise, extending the current period of job creation to 16 months. That said, the rate of payroll growth was the softest seen since April 2021."

“While there were signs that price pressures have peaked, costs continued to rise sharply overall. Along with signs of weakening demand, an uncertain economic outlook and the cost-of-living crisis, a number of firms expressed concerns around the outlook and fears of a recession in the year ahead.” 

Download the Scotland PMI Report July 2022 (PDF, 369KB)

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