Scottish recovery 'still out of sight'

Published on Monday 13 April 2009 21:21

SCOTLAND may be "beyond the worst" of the recession but recovery "remains out of sight", a key report published today suggests.

Royal Bank of Scotland's latest purchasing managers' index (PMI) follows a string of encouraging economic reports and surveys, which have hinted that the downturn in the economy may be hitting a floor.

While today's report highlighted a further deterioration in operating conditions last month, the rates of decline across many of the survey's key measures eased when compared with the figures for February. The rate at which employers were found to be shedding jobs fell to the lowest level since October.

The key PMI business activity index – which measures firms' output – stood at 41.8 in March, up from 36.8 in February. Any figure below 50 indicates contraction.

New orders continued to drop in March, standing at 39.8, but at a slower pace than in February, when the index hit a low of 36.1.

The level of work in hand but not yet completed recorded its weakest contraction since November, with RBS's panellists suggesting that falling workloads had freed up resources to deal with outstanding business.

Across the UK as a whole, the reading from the business activity index increased from 40.1 to 44.1, with new orders up from 40.1 to 42.7 and outstanding business going from 36.3 to 38.1.

The report – which is compiled by Markit Economics – surveyed more than 600 companies working in the manufacturing and service sectors.

In terms of jobs, Scotland was still shedding workers last month but at the slowest rate of any nation in the UK, with the Scottish figure up from 41.4 in February to 42.1 in March. Throughout the UK as a whole, the jobs situation became worse, with the index dropping from 38.3 to 37.7. Panel members said declining workloads had reduced manufacturers' demand for staff, with further redundancy programmes being implemented and managers not replacing staff who had left.

David Fenton, RBS's head of macroeconomics, said: "We saw more evidence that the first quarter was probably the worst of this cycle in Scotland.

"The big jump in new orders – the forward-looking part of the survey – and the decline in excess stocks may be straight out of the textbook for a normal economic recovery. But this is not your common or garden recession.

"The survey remains close to historic lows and pace of decline is still firmly in recession territory. In short, the collapse in demand is not getting worse – we may be beyond the worst – but a recovery remains out of sight."

Inflation also began to ease, with the input price index falling from 56 in February to 53.5 in March. While prices continued to rise, they did so at their lowest level since March 2002. Throughout the UK as a whole, input prices continued to fall in March, with the index recording 49.3, edging up from the reading of 49.1 in February, showing that the decline had slowed.

Earlier this month, upbeat reports across the Chartered Institute of Purchasing and Supply's construction, manufacturing and services PMI surveys prompted experts to suggest the UK economy may be close to bottoming out following months of gloomy economic data.

Glasgow hit hardest by recession-led job losses

SCOTLAND'S largest city has been hardest hit by job losses north of the Border over the past year, according to figures published today.

A study by the Work Foundation found that the rise in the number of people out of work and claiming job seeker's allowance (JSA) in Glasgow was higher than anywhere else in Scotland.

A total of 20,276 people in the city were claiming JSA in February this year – 5,873 more than the same time last year.

The increase in the number of people claiming the benefit in Glasgow is the third-highest in the UK, with only Birmingham and Leeds experiencing larger rises.

The Work Foundation conducts independent research and advises policymakers on improving the quality of working life. Naomi Clayton, a senior researcher, said it was "core cities of the north and midlands" that had been worst affected by rising numbers of people claiming JSA.

She said: "Places in the eye of the storm as job losses mount are the UK's core cities and areas associated with traditional manufacturing – places which in many cases had yet to recover fully from previous recessions before this one set in.

Perhaps more revealing, though, are the council areas that have seen the sharpest upward movements in unemployment rates.

"Policymakers ignore how recessions play out locally at their peril.

"It is to be hoped that the forthcoming Budget focuses much more attention on the large cities that can drive the recovery."