Bank of Scotland

Bank of Scotland PMI: Output growth continues at record pace

14 October 2013

  • Rates of growth in output and new work unchanged from August’s survey records
  • Pace of job creation remains solid
  • Fastest rise in input prices in five months

Scotland’s private sector economy continued to expand rapidly in September, with Bank of Scotland’s latest PMI survey showing survey-record equalling rates of growth in both output and new business. The pace of job creation was also unchanged since August, remaining solid and well above the long-run average. Higher cost pressures emerged, but prices charged across the private sector economy rose only marginally on the month.

Unchanged from its survey-record high of 58.3 in August, September’s Bank of Scotland PMI – a composite indicator designed to gauge month-on-month changes in combined manufacturing and services output – signalled sustained strong growth in business activity. The increase was a reflection of both higher service sector activity and greater goods production but, whereas the former rose at the joint-fastest rate in the series history, the latter expanded at a slower pace than in August.

As was the case with output, the latest increase in the level of new business at Scottish firms also matched August’s series record. September’s rise was the tenth in successive months, and supported by further growth in new export orders at manufacturers. A strong housing market was another factor driving the upturn, according to panel member reports.

Employment in Scotland’s private sector economy rose during September, at a solid rate that was unchanged from that recorded in the preceding survey period. The degree to which staffing levels rose was also in line with the UK average. Although the service sector led the increase in staffing numbers north of the border, Scottish manufacturers likewise posted a notable rise.

Backlogs of work were accumulated at businesses during the latest survey period, continuing the trend observed in each of the past four months. Moreover, the latest increase was more marked than in August.

Higher food, fuel and labour costs meanwhile helped lift the rate of input price inflation in Scotland to the fastest in five months, and one that was well above the UK average. That said, businesses largely refrained from passing on increased cost burdens to clients, recording (on average) only a marginal increase in output prices due to a competitive market environment.

Donald MacRae, Chief Economist at Bank of Scotland, said:
“September’s PMI showed the private sector of the Scottish economy continuing to expand across both manufacturing and service sectors providing further evidence of the strengthening of the recovery. Output and new business rose at survey-record equalling rates accompanied by growing employment and rising new export orders. The PMIs of the last six months suggest the Scottish economy not only grew in quarter two this year but saw that growth accelerate in quarter three. The recovery is gaining momentum.”

Read full press release