Scots economy grows but UK output drops

By PETER RANSCOMBE
Published on 13/08/2012 00:00

WEAKNESS in the manufacturing sector meant growth in Scotland’s private sector economy slowed last month, avoiding the contraction that affected the UK as a whole, according to the Bank of Scotland’s latest report.

The bank’s monthly purchasing managers’ index (PMI) report described the start to the third economic quarter as “challenging” for Scottish businesses, with manufacturers reporting the biggest drop in the number of goods they produced for more than 18 months.

Yet a further rise in activity in the services sector helped the PMI to stay above the 50 mark that separates growth from contraction, with the index dipping to 51 from 52.5 in June.

Scotland fared better than the UK as a whole, which reported a contract in economic activity.

Donald MacRae, chief economist at Bank of Scotland, remained optimistic that the Scottish economy could still growth, albeit at a slow rate, over the rest of the year.

MacRae said: “The July PMI suggests growth in the private sector of the Scottish economy was marginal with a fall in manufacturing output offset by continuing growth in service activity. The Scottish economy is struggling to maintain growth momentum in the face of the global slowdown. Low or no growth is in prospect for the rest of 2012.”

Scottish businesses, mainly in the services sector, continued to recruit staff last month but at a slower pace than in the preceding periods, the report added.