Bank of Scotland

Bank of Scotland PMI: Growth in business activity rebounds to fastest in three months

10 February 2014

The first Bank of Scotland PMI report for 2014 showed the upturn in the private sector economy regain momentum after growth eased in the latter months of 2013. An accelerated rise in new business in January boosted both output and job creation, with the former rising at one of the strongest rates on record.

Input price inflation meanwhile dipped from December’s nine-month high, but nevertheless remained strong and led businesses to raise output prices at a faster rate.

January saw the most marked increase in combined manufacturing and service sector output for three months, with the rate of growth only just below the survey highs reached last summer. The headline Bank of Scotland PMI posted 57.2, up solidly from 54.5 in the final month of 2013. The pace of expansion signalled by the index was still slightly slower than that observed across the UK as a whole, however.

Behind January’s sharp and accelerated expansion in output was a faster increase in new business – also the steepest since last October. Manufacturers and service providers alike recorded strong expansions in new work, with the former also signalling a return to modest growth in new export orders after two months of decline.

Employment at Scottish private sector businesses rose for the fourteenth month in a row during January, the longest sequence of net job creation in nearly six years. In line with stronger growth in both output and new business at the start of the year, the degree to which employment rose was more marked than in December.

The level of work-in-hand (both in progress and not as yet started) meanwhile increased again, but only marginally and at the slowest rate in the current eight-month sequence of accumulation.

Input price inflation north of the border eased to a three-month low in January, reflecting a moderation in the rate of increase in services firms’ operating costs. Cost inflation was nevertheless stronger than the UK average, with staff and raw materials reported by panellists to be the key sources of inflationary pressure.

Increased demand meanwhile provided businesses with greater pricing power in January, leading to the fastest rise in average output charges since last July.

Donald MacRae, Chief Economist at Bank of Scotland, said: January’s PMI rose to 57.2 - its highest level for three months and back to the highs of last summer.  Output grew strongly in both manufacturing and service sectors accompanied by rising employment and increasing levels of new business.  The growth in new export orders after two months of decline is particularly welcome.  Business confidence continues to increase ensuring the Scottish economy not only continues the recovery but enters 2014 with growth momentum.”

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