Cost pressures failing to dent recovery, says BoS
The upbeat comments, by Bank of Scotland’s (BoS) chief economist, Donald MacRae, come despite concerns that Scottish businesses are facing higher costs than their counterparts elsewhere in the UK.
According to BoS’s latest purchasing managers’ index (PMI), Scotland’s private sector – accounting for just over half of the economy – continued its recent strong performance into the final quarter of the year.
While the report’s key output barometer dipped to 57.8 last month, from August and September’s survey-high readings of 58.3, it remained well above the 50 mark that separates contraction from expansion. October’s growth was under-pinned by the service sector.
The survey is the latest piece of evidence supporting a solid, if unspectacular, economic recovery north of the Border.
Last week, think-tank the Centre for Economics and Business Research predicted that Scotland would finally complete its recovery from the financial crash and recession in 2014. Its research paper markedly revised upwards its prognosis for Scottish growth over the coming two years, predicting a 2.2 per cent increase next year, the best rate since 2007.
Today’s PMI points to solid job creation and describes business growth as remaining “sharp”.
The survey is one of the most extensive of its type, polling purchasing executives in some 600 manufacturing and service sector companies.
MacRae said: “October’s PMI was the fourth highest since the survey began in 1998, suggesting the private sector of the Scottish economy entered the final quarter of the year enjoying robust growth.
“A steep rise in new work was accompanied by a modest but welcome increase in new export orders. Both the services and manufacturing sectors created more jobs. The Scottish economy is maintaining growth momentum, making the recovery more sustainable with each passing month.”
Services firms, including those in tourism and travel, recorded an increase in operating costs. But business activity in the sector continues to grow strongly, the report noted.
Manufacturing growth continues to lose momentum, but has not impeded the rate of job creation.
While the overall rate of input price inflation faced by businesses in Scotland eased slightly last month, it nevertheless remained above the UK-wide average. Food and utilities were among the inputs that services firms reported as rising since September.
Finance Secretary John Swinney said the economic recovery was gaining ground.
He said: “These figures follow on from recent GDP and labour market statistics which show the Scottish economy grew faster than the UK over the year to quarter two, with employment levels now at a five-year high and the economy growing continuously over the past four quarters.
“Business growth and investment will be key to securing economic expansion over the coming year and in this spending review period we are investing £10 billion in capital projects, building homes, schools and facilities to support the economy.”