Scotland to avoid ‘triple-dip’ after activity rise

Donald MacRae revealed that the PMI had hit an eight-month high. Picture: Contributed
Donald MacRae revealed that the PMI had hit an eight-month high. Picture: Contributed
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BANK of Scotland chief economist Donald MacRae believes Scotland will avoid a triple-dip recession after business activity rose for the eight month in a row.

A rise in both domestic and export orders during February pushed the bank’s purchasing managers’ index (PMI) up to 52.5 from 52.3 in January.

Manufacturers created more jobs last month, while the service sector maintained its employment levels.

MacRae said: “February’s PMI rose to an eight-month high, signalling continuing improvement in output and business activity during the month.

“The manufacturing sector recorded a modest rise in employment, while services maintained job numbers.

“The increase in new orders both in the domestic economy and for exports is particularly welcome.”

MacRae added: “These results provide further evidence that the Scottish economy is avoiding a ‘triple dip’.”

As was the case in January, Scotland registered a sharper increase in output than the UK as a whole.

Input price inflation accelerated during February from January’s seven-month low, and was the fastest since last November. Firms blamed higher fuel and staff costs for the rise in their operating costs.

MacRae’s positive comments follow a series of conflicting surveys and economic reports.

The service sector accounts for more than three-quarters of UK gross domestic product (GDP) and this month’s Markit-Cips PMI report had fuelled hopes that a triple-dip recession would be averted as the sector returned to growth following a shock contraction in December.

However, a survey released last week by accountancy firm BDO suggested that optimism among British businesses has fallen to its lowest level in 21 years.

The UK economic output shrank by 0.3 per cent in the final three months of 2012, which would put the country back in recession if it suffered a further contraction in the current quarter.

• Job cuts in information technology (IT) departments are “finally coming to an end”, with only one in ten IT directors expecting to make job cuts in 2013, according to a survey conducted by ­ReThink Recruitment.

Michael Bennett, director of ReThink, said: “Confidence about what 2013 holds in store has spread throughout IT departments. Factors that tended to make IT directors cautious last year, such as the possible ‘Grexit’ from the eurozone, have subsided.”