Growth slides as price of raw materials rises

Published on 09/09/2012 23:58

GROWTH of the private sector economy in Scotland reached its slowest rate in 20 months in August as orders slumped and the price of raw materials rose, a report out today has revealed.

The latest Bank of Scotland PMI report shows that Scottish private sector activity increased only marginally in August, at a rate well below the UK-wide average.

The slump reflected a broad-based and accelerated drop in new work for both manufacturers and service businesses, which led to weaker job creation. Companies hit by the rising cost of fuel and raw material – increasing at the fastest rate since April – led to businesses being forced to raise prices over the month.

In August, the PMI fell for the second month running to 50.3, from 51.0 in July, and signalled only a marginal increase in services activity and a contraction in manufacturing. Five other UK regions saw reductions in new work, but only Northern Ireland posted a more marked drop than Scotland.

Donald MacRae, BoS chief economist, said: “The PMI for August showed the private sector of the Scottish economy growing for the 20th month in a row. However, manufacturing output fell and new domestic and export orders decreased, although employment continued to grow in the service sector.”

John Swinney, finance secretary, said: “We are doing all we can within our current powers to strengthen the economy, to create and bring jobs to Scotland, to stimulate growth, and to create the most supportive environment for business in the UK – and we are achieving results.

“But … the UK government’s repeated failure to give the green light to much-needed capital investment is hampering progress.”