Growth weakens but Scottish economy moving on up

The Bank of Scotland's latest purchasing managers' index (PMI) suggests that the rate of job creation has remained solid over the last year. Picture: Phil Wilkinson
The Bank of Scotland's latest purchasing managers' index (PMI) suggests that the rate of job creation has remained solid over the last year. Picture: Phil Wilkinson
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SCOTLAND’S economic recovery hopes suffered a set-back today as growth in the nation’s private sector slowed to its weakest pace in six months.

In a reality check for the Scottish Government, a key survey of hundreds of service and manufacturing companies showed business activity and levels of new work cooling last month.

Manufacturing output stagnated, having previously risen for seven straight months, while growth of business activity at service sector firms was the slowest since July.

However, the Bank of Scotland’s latest purchasing managers’ index (PMI) suggests that the rate of job creation has ­remained solid over the last year, with both manufacturers and service providers adding more staff during November.

The report’s key output barometer dipped to 55.2 last month, down from 57.8 in October and August and September’s survey-high readings of 58.3. Any reading above 50 constitutes growth, 50 indicates no change and below 50 suggests contraction.

Donald MacRae, chief economist at Bank of Scotland, said: “The private sector of the Scottish economy grew in November. New work continued to increase but at the slowest rate for six months.

“Both manufacturers and service providers added more staff, demonstrating confidence for the future. The recovery in the Scottish economy continued in November, but at a slower pace than the survey-record levels of August and September.”

The PMI survey is one of the most extensive of its type, polling purchasing executives in some 600 manufacturing and service sector companies.

It also noted that input price inflation had ticked up to an eight-month high, and was running slightly above the long-term series average, putting additional pressures on cash-strapped businesses.

Recent research has pointed to a solid, if unspectacular, economic recovery north of the Border.

Last month, 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.

Scotland’s private sector accounts for just over half of the economy.

Finance Secretary John Swinney said: “This month’s PMI figures show the 14th month of expansion in private sector output in Scotland, with employment also continuing to grow.

“They show continual progress in the economic recovery in Scotland, and follow significant upward revisions to Scottish growth forecasts for 2013 and 2014.

“Gross domestic product and labour market statistics show the Scottish economy growing 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.”

He added: “There will be no let-up in the Scottish Government’s commitment to securing economic growth.”

A sister purchasing managers’ survey, by Lloyds Banking Group, covering private sector business activity across England and Wales dipped slightly to 61.2 in November from 61.8 in October.