PMI: private sector up, but Scots still lag UK

Published on Sunday 7 March 2010 21:21

SCOTLAND'S private sector staged an encouraging comeback in February after adverse weather conditions at the start of the year saw output plummet, figures out today reveal.

Activity levels on the respected purchasing managers' index (PMI) soared in February – but economists warn that the Scottish recovery is still lagging far behind that of the rest of the UK.

The Scottish PMI, produced by research group Markit, recorded a rise to 54.3 from 50.6 in January, with 50 marking the crucial diving line between growth and contraction.

The increase was fuelled by an influx of new orders, which pushed many Scots firms to recruit extra staff. However, the figures reveal a worrying chasm between the Scottish economy and the rest of the UK, which is staging a stronger return to growth.

The PMI survey appears to back up a recent warning from the influential Fraser of Allander Institute that Scotland could return to recession later this year.

Andrew Self, an economist at Markit, said: "Latest data confirmed that January's stumble along the road to recovery came about primarily due to adverse weather conditions, as output growth (in February] returned to a rate consistent with November's two-year peak.

"The survey nevertheless paints a mixed picture. Activity and new order growth remain considerably below the average seen across the UK as a whole, and job creation was inhibited by steep rates of input price inflation."

Fraser of Allander has suggested that Scotland's historical bias towards the public sector leaves it more exposed to the threat of a "double-dip recession" when the UK government embarks upon measures to rein in Britain's ballooning public debt.

A brace of business organisations is today calling on the government to take urgent action on the public deficit. Close to three-quarters of company directors polled by the Institute of Directors want public spending cuts to commence this year.

Meanwhile, the CBI is pushing the Treasury to balance Britain's books by 2015-16, two years earlier than scheduled, to counter market concerns over debt and the sustainability of the UK's prized AAA credit rating.

But Liz Cameron, chief executive of the Scottish Chambers of Commerce, said today's PMI figures show Scots firms are performing well in what continues to be a challenging environment.

Cameron said: "We have always known that recovery from the longest recession in recent times would be a long slow process. These figures show, that like the crocuses pushing up through the cold ground, there is always a spring after winter."