Strong output growth maintained into July
12 August 2013
- Output growth dips slightly since June, but nonetheless remains sharp
- Fresh survey-record rise in new business
- Steepest rise in output prices in two years
A further strong expansion in Scottish private sector business activity was indicated by latest PMI data from Bank of Scotland, with output levels driven up by a fresh survey-record rise in new business intakes. Job creation continued into the third quarter but, as with output, at a slightly reduced pace. An added sign of strength in the economy was a solid rise in average output prices, the sharpest in two years, with firms meanwhile facing the same rate of cost inflation as in June.
The Bank of Scotland PMI registered 56.7 in July, down slightly from June’s 73-month high of 57.0 but nevertheless indicative of another sharp expansion in private sector business activity north of the border. Growth reflected substantial increases in output at both services firms and manufacturers, the latter of which posted the fastest increase in goods production since February 2011. Despite growth in Scotland being sharp, it was nevertheless below the UK average.
Contributing to July’s increase in business activity in Scotland was a further rise in the level of incoming new work. A second survey record in a row, the latest increase in new business was sharp and extended the current sequence of growth to eight months. Boosting demand was an improvement in market confidence, according to reports from service providers and manufacturers alike.
Scottish firms maintained a preference for higher employment in July, raising staffing numbers for the eighth straight month. The rate of growth was solid, albeit slightly weaker than in June due to a slowdown in the pace of job creation in the service sector.
Data suggested that additional jobs are also likely to be created in coming months to counter accumulating backlogs of work. July saw the most marked rise in outstanding business in more than six years.
Stronger demand, alongside higher input costs, encouraged firms in Scotland to raise their output prices. Furthermore, the rate of inflation in selling prices picked up from the marginal pace in the previous month to the fastest in two years.
Input price inflation north of the border meanwhile stabilised at a solid rate, and one that was above the UK-wide average. Underpinning the latest rise in cost burdens were higher food and fuel costs, as well as increased utility bills.
Donald MacRae, Chief Economist at Bank of Scotland, said:
“July’s strong PMI reading signalled the Scottish economic recovery continues. Both manufacturing output and services activity increased in the month, with services firms experiencing the fastest rise in new work in over 15 years. July saw a return to growth in new export orders for the first time in five months. Business confidence is clearly on the increase with employment rising for the eighth month in a row. The recovery will become even more embedded if firms build on this ten-month run of positive PMIs by increasing investment.”