Scots economy continues to grow, though momentum hard to find

Bank of Scotland’s purchasing managers index for January reached 51.4, from 51.2 the month before. A score above 50 shows that output is increasing.

Donald MacRae, chief economist at Bank of Scotland, said the figure suggested the Scottish economy continued to enjoy some growth.

He said: “The first increase in new orders at manufacturers for five months was particularly encouraging.

“The Scottish economy is struggling to maintain growth momentum in the face of a global slowdown but is so far avoiding a return to recession.”

The bank said employment within Scotland’s private sector increased at a slightly quicker pace than in the previous month. But job creation remained “modest” and was faster across the UK as a whole. January data showed input price inflation easing to the weakest since September 2010.

The report also shows that new export orders weakened but at the lowest rate for four months, just as the Scottish Government has launched a new online, one-stop-shop to provide guidance to companies on exporting and growing their international business. Export From Scotland is designed to provide the first step in training companies to develop their expertise to help realise their export potential.

The Scottish Government says efforts to strengthen links to overseas markets are paying off, with the value of exports increasing by £355m to £22bn in 2010.

Bank of Scotland’s report comes as two surveys of the UK economy also show the first half of 2012 is unlikely to see significant growth.

The CBI downgraded 2012 growth prospects for the fifth time amid the worsening eurozone debt crisis and now expects output to rise just 0.9 per cent, down from the 1.2 per cent growth it forecast as recently as November. Its prediction for 2013 was also lowered to a modest 2 per cent, from 2.2 per cent.

Although growth will remain subdued and conditions tough, the business body thinks the UK will avoid an official recession – two quarters of declines in a row – as it bounces back from its 0.2 per cent fall in the final quarter of 2011, with growth of 0.2 per cent in the first three months of this year.

The CBI added that households suffering their longest squeeze in living standards for a generation will receive some much needed relief as inflation continues to fall from last year’s peak.

But accountancy firm BDO said the UK was likely to experience a “technical recession” as the optimism found in its latest business survey would take until the summer to translate into growth.

BDO’s optimism index, which forecasts business confidence two quarters ahead, rebounded in January to 94.1 from 91.5 in December – the largest monthly increase since last February. Although the reading remains below the 95 mark that indicates growth, the data suggest the economy could begin to recover in the second half of 2012.

Neil Craig, managing partner for BDO in Glasgow, said: “Prospects for growth continue to be fragile – as the UK has already very likely entered a technical recession and the situation in the eurozone remains difficult to predict.”