Scotland’s growth slows but firms remain resilient

During last month, service sector firms and manufacturers alike took on additional staff, helping to clear backloads of work, according to a closely-monitored survey of hundreds of Scottish businesses.

Today’s purchasing managers’ index (PMI) from Bank of Scotland coincides with a snapshot of Scotland’s retail sector which suggests shops north of the Border fared better than their southern counterparts during the big freeze.

The reports are published ahead of gross domestic product (GDP) figures for the last quarter of 2012 and in the wake of another major survey, from the Scottish Chambers of Commerce, showing the private-sector economy is holding its own in testing times.

The latest PMI report recorded a reading of 51.1 for March, down from February’s 52.5 but above the 50 mark that separates economic growth from contraction. Levels of new business increased at a moderate pace.

Donald MacRae, Bank of Scotland’s chief economist, said the economy remained in recovery mode.

“The PMI for March showed the private sector of the Scottish economy recording a modest expansion. The level of new business rose, accompanied by an increase in the number of jobs in both manufacturing and service sectors.

“The PMI has now been above the no-growth level of 50 for six consecutive months, suggesting the Scottish economy is continuing its slow recovery.”

More jobs were created in the private sector and at the fastest rate of growth in eight months, with manufacturing and services companies said to have recruited additional staff at modest rates.

However, manufacturing export activity was unchanged on the month, while the report also identified a further rise in’ input costs on the back of higher fuel prices and a weak pound.

The PMI is compiled for the bank by research outfit Markit and is based on the monthly replies to questionnaires sent to purchasing executives in 600 manufacturing and service sector firms.

Meanwhile, the Scottish Retail Consortium (SRC) said today that last month’s bad weather led to a decline in high street numbers. Snow and unseasonably low temperatures triggered a 3.8 per cent dip in footfall in Scottish shops against March last year.

The numbers are also down on those from February, but Scotland fared better than the rest of the UK, where shopper numbers fell by 5.2 per cent.

SRC director Fiona Moriarty said: “Retailers in Scotland will be hoping that the late onset of more spring-like weather makes shopping trips and seasonal ranges more appealing to customers.”

Traditional high streets were the worst hit according to the figures, with a 7 per cent decline over the year. Covered shopping centres performed better, but still saw a fall of 2.4 per cent.

Diane Wehrle, a director of consumer analyst firm Springboard, said media attention around the Budget and benefit reforms affected consumer confidence.

The final week of the month did yield some positive results, with retail park footfall “significantly bolstered,” she said, adding: “Home-owners took advantage of the long Easter bank holiday to visit DIY out-of-town outlets.”