Bank of Scotland

Upturn in private sector economy continues, leading to further job creation

08 September 2014

August saw further solid growth of private sector business activity north of the border, according to the latest Bank of Scotland PMI report. This latest expansion in output was again broad-based across both manufacturing and services, and contributed to a further notable increase in employment. However, new business increased at a much slower rate, while a lack of pricing power led businesses to reduce output prices.

Business activity in Scotland’s private sector economy rose solidly in August, although the rate of growth was the slowest since May. This was signalled by the seasonally adjusted headline Bank of Scotland PMI – a single-figure measure of the month-on-month change in combined manufacturing and services output – posting 54.6, down from July’s six-month high of 56.8. Both the manufacturing and service sectors made appreciable contributions to overall growth, with the former recording the slightly faster increase in output.

Output growth remained robust despite a slower rate of increase in incoming new business in August – the least marked in 16 months. Behind this slowdown was a moderated rate of new business growth at services firms. Manufacturers recorded a further marked increase in overall new orders, although did see a fall in export sales.   

Scottish private sector employment remained on the up as a result of growing workloads, stretching the ongoing spell of net job creation north of the border to 21 months. Furthermore, the extent of August’s increase in staffing numbers was the most marked since February and in excess of the UK average.

The level of outstanding business at companies in Scotland meanwhile decreased for the fourth straight month. As has been the case throughout the current sequence of depletion, however, the rate of decline was only marginal. 

August’s survey showed a lack of pricing power among Scottish businesses, with output charges reduced for the first time in more than a year-and-a-half, albeit only marginally. In contrast, average costs rose at a solid rate that was unchanged from July, with higher staff pay reportedly the primary factor leading expenses to rise.

Donald MacRae, Chief Economist at Bank of Scotland, said: August saw a broad based rise in business activity across both the services and manufacturing sectors.  Employment rose at the fastest rate for six months confirming continuing high levels of business confidence.  The Scottish economy continues to recover and grow in the second half of 2014.

Read full press release.