Business confidence on the up as private sector growth increases

But Bank of Scotland’s latest purchasing managers’ index (PMI), published today, still shows a healthy level of growth, edging back only slightly from June’s 73-month high of 57.

The higher above 50 a PMI score is, the faster business is likely to be expanding, and July’s 56.7 is still healthier that the scores recorded early in the year, when the economic recovery was in considerable doubt.

Donald MacRae, chief economist at Bank of Scotland, said: “July’s strong PMI reading signalled the Scottish economic recovery continues. Both manufacturing output and services activity increased in the month, with services firms experiencing the fastest rise in new work in over 15 years.”

He added that July saw a return to growth in new export orders for the first time in five months, saying: “Business confidence is clearly on the increase with employment rising for the eighth month in a row. The recovery will become even more embedded if firms build on this ten-month run of positive PMIs by increasing investment.”

However, the equivalent index for the English regions rose to 60 last month, signalling the strongest growth since the series began in January 2001.

Scottish finance secretary John Swinney pointed out that Scottish firms have had the better of their English and Welsh counterparts in recent months.

He said: “These positive results follow recent labour market and GDP figures which show Scotland is outperforming the UK in terms of employment and growth. Youth unemployment figures also continue to outperform the UK.”

The Bank of Scotland survey also showed job creation continued into the third quarter but, as with output, at a slightly reduced pace compared with June.

An added sign of strength in the economy was a solid rise in average output prices, the sharpest in two years, while firms faced the same rate of cost inflation as the month before.

Data suggested that additional jobs are also likely to be created in coming months to counter accumulating backlogs of work. July saw the most marked rise in outstanding business in more than six years.

Elsewhere, evidence that the employment situation is improving throughout the UK was strengthened by the latest survey from human resources industry body CIPD. Its summer report, out today, shows that for the sixth quarter in a row employers expect jobs growth.

The group’s chief economist, Mark Beatson, said it was welcome news for jobseekers. He said: “These results suggest we should see further jobs growth over the summer and autumn and hopefully reflect a degree of optimism about growth prospects for 2013.”

Although the news from employers is good, it has yet to translate into greater confidence among workers.

Legal & General’s latest job security index shows confidence has fallen across the board, although there is a widening gap between part-time and full-time workers’ sense of job security.

Just under two-thirds of part-time workers said they were confident about their job security, compared to nearly three quarters of full-timers. The confidence gap is at its widest since the index began in January 2012.

Workers’ growing insecurity in their jobs is among the factors blamed for the lack of consumer spending growth in recent years.