Bank of Scotland

Bank of Scotland PMI: Upturn in Private Sector Economy continues into October

11 November 2013

  • Business activity rises markedly, boosted by growth in new work
  • Solid rate of job creation maintained
  • Input price inflation outpaces growth in output prices

Scotland’s private sector economy continued its recent strong performance into the final quarter of the year, with output and new business growth remaining sharp in October according to Bank of Scotland’s latest PMI report. Job creation north of the border was solid and broad based by sector. Input price inflation meanwhile dipped slightly on the month, but nevertheless remained much stronger than the rate of growth in output prices.

Private sector output in Scotland rose markedly in October, as highlighted by the Bank of Scotland PMI – a composite indicator designed to gauge month-on-month changes in combined manufacturing and services output – posting at 57.8. Although slightly lower than August and September’s survey-high readings of 58.3, this latest posting was still among the highest recorded since the series began in January 1998. October’s expansion was primarily centred on the service sector, with growth of goods production easing to only a modest pace.

October also saw a steep rise in the level of new work at private sector firms, stretching the current sequence of growth to 11 months. Matching the trend in output, however, the latest increase was less marked than one month previously and slower than the UK-wide average. Data meanwhile signalled a modest rise in new export orders at manufacturers north of the border.

Increased levels of business activity and new work encouraged further job creation in October, extending the current sequence of rising employment to 11 months. The rate of increase was solid and unchanged from that recorded in each of the previous two months.

There remained pressure on capacity despite additional staff being added during the month, as highlighted by a further increase in the level of work-in-hand at Scottish businesses. This stretched the current spell of backlog accumulation to five months.

The rate of input price inflation faced by businesses in Scotland slowed slightly in October, but nevertheless remained just above the UK-wide average. Food and utilities were among the inputs that services firms reported as up in price since September, while manufacturers indicated that a number of material costs had risen in line with higher demand. Average output prices meanwhile increased only marginally, weighed down by competitive pressures.

Donald MacRae, Chief Economist at Bank of Scotland, 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.”

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