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Scotland’s economy sees strong private sector growth

The recovery in Scotland’s private sector economy has continued into the second half of the year with robust growth, according to a new report.

Business activity rose at the fastest rate in six months in July, helping to sustain solid employment growth across both the manufacturing and service sectors.

The Bank of Scotland July PMI report also recorded a robust increase in overall new business, despite persistent weakness in manufacturers’ export sales.

Scottish private sector output increased at a “sharp and accelerated rate” in July, the report found.

This was highlighted by the Bank of Scotland PMI - a single-figure measure of the month-on-month change in combined manufacturing and services business activity - which was at a six-month high of 56.8, up for the second straight month from 55.9 in June and 54.0 in May.

Donald MacRae, chief economist at Bank of Scotland, said: “July’s PMI reached a six-month high of 56.8, indicating robust growth in the private sector.

“Employment and new business both expanded in the month across manufacturing and services but the level of manufacturing new export orders fell, illustrating the challenges for exporters from a strong pound and weak growth in the eurozone economies.

“The recovery continues with the Scottish economy entering the second half of the year in growth mode.”

There was also another strong increase in incoming new work, although export orders at manufacturers decreased for the fifth time in the past six months.

The report found Scotland’s labour market continued to benefit from the upturn in economic activity, with jobs growth recorded at manufacturers and services firms alike.

However the overall rise in employment was slightly less marked than in June, and also slower than that seen across the UK as a whole.

Staffing capacity was such that businesses were generally able to keep atop of workloads during July, with data showing broadly no change in the level of outstanding business north of the border.

Output prices rose moderately in July, with the rate of inflation having cooled slightly from the month before while the rate of increase in input prices at Scottish private sector firms eased.

Manufacturing

The report found that manufacturing output rose at the fastest rate in four months in July.

Factory output north of the border has now risen in 15 of the past 16 months, the exception being last November when output stagnated briefly.

The level of new orders at Scottish manufacturers increased in July, stretching the current sequence of growth to 19 months.

Almost 29% of companies surveyed recorded a rise in their incoming new business, while the rate of growth in new orders was solid, having accelerated to the fastest in three months.

However the report found that although manufacturers saw strong growth in new orders overall, they continued to struggle to find new business overseas.

Finance Secretary John Swinney said: “We welcome these figures which suggest a solid start to the second half of 2014 in the Scottish economy.

“The recovery in Scotland’s economy is consolidating; this summer’s independent growth forecasts were revised up and the pace of growth is widely expected to accelerate this year.

“With full fiscal and economic powers of independence, the Scottish Government could do so much more to strengthen our economy and create more jobs.”

Scottish Secretary Alistair Carmichael said: “Today’s PMI report shows that being part of the UK with its larger market, stronger and growing economy and stable currency is creating more jobs and better opportunities for Scotland.

“As we move into the second half of 2014, this report shows that Scottish employment has grown for the 20th straight month.

“This builds on the encouraging economic signs so far this year, such as reaching a record high in employment, more Scottish women in work than ever before and the UK’s economy being predicted to grow faster than any other G7 economy.

“It is also very encouraging to see a rise in the number of new Scottish businesses.”

 

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