Sharpest increase in business activity since April 2011
10 June 2013
- Growth of output hits 25-month high
- Faster increases in new work and employment
- Input price inflation weakest since June 2012
Latest PMI data from Bank of Scotland showed a marked improvement in the health of the private sector economy north of the border. May saw solid and accelerated increases in both output and new work inflows at Scottish businesses, as well as the fastest rise in employment for over a year. Input price inflation meanwhile weakened to an 11-month low, though output prices rose to the greatest extent since last September.
Growth of private sector business activity in Scotland accelerated to a robust pace in May, and one that was the fastest since April 2011. This was signalled by the Bank of Scotland PMI posting 54.4, up from 53.1 in April. Both factory production and service sector business activity rose at faster rates, the sharpest in 12 and 13 months respectively. The pace of economic expansion was broadly in line with the average across the UK as a whole.
Behind the overall increase in output north of the border was a further improvement in new work inflows. The level of new business has now increased for six months running, and the latest rise was the most marked in over two years.
Stronger demand across domestic markets was the main factor underlying growth of new business, as new export orders placed with manufacturers fell fractionally on the month.
In line with the improved trends in both output and new business, the pace of job creation at Scottish firms quickened to the fastest in 13 months. Furthermore, Scotland posted a stronger increase in employment than any other part of the UK except for the West Midlands.
The amount of work-in-progress (but not yet completed) at Scottish businesses decreased slightly during the latest survey period, extending the ongoing spell of depletion to four months.
May data pointed to a further drop in input price inflation in the Scottish private sector economy, to the slowest since June 2012. The rate of inflation was below the long-run series average, although still much faster than the modest pace registered at the UK level.
According to anecdotal evidence, lower fuel prices was one factor that dampened overall inflationary pressures in Scotland.
Output prices meanwhile rose for the fifth straight month in May. The rate of inflation was the fastest since last September, albeit still only mild overall.
Donald MacRae, Chief Economist at Bank of Scotland, said:
"At 54.4 May’s PMI is not only the highest for 25 months but has now been above the no-growth level of 50.0 for eight months in a row. Output grew in manufacturing and activity was strongly up in the large services sector with an encouraging rise in new orders across the economy evident for the sixth month in succession. However, growth appears confined to the domestic market with new export orders falling slightly in the month illustrating the effects of the recession in the Eurozone. These results show the recovery in the Scottish economy is becoming more strongly embedded with every passing month.”