Scotland’s private sector sees growth surge at end of second quarter
08 July 2013
- Fastest rise in business activity since May 2007
- Survey-record increase in new work
- Rate of job creation at 14-month high
Growth in Scotland’s private sector economy accelerated sharply at the end of Q2, latest PMI data from Bank of Scotland have shown. Marked increases in business activity and new work led firms to raise employment levels, as backlogs of work accumulated for the first time in close to two years. Input prices faced by businesses meanwhile rose at a slightly faster pace, though competitive pressures ensured output price inflation remained muted.
Business activity in Scotland’s private sector economy rose sharply in June, and at the fastest rate since the height of the upturn before the 2008/9 financial crisis. The Bank of Scotland PMI rose for the third straight month to 57.0, up from a reading of 54.4 in May. This also indicated a slightly faster expansion in output north of the border than across the UK as a whole over the month. Scotland’s expansion was broad-based by sector, with both factory output and service sector activity up markedly.
June meanwhile saw a survey-record increase in the level of new business placed with firms in Scotland. Growth in new work was principally driven by resurgent demand in the domestic market, with manufacturers recording a further loss of new business from clients overseas. Total incoming new business has now risen in each of the past seven months.
Increased workloads and improving pipelines of new work encouraged businesses to take on additional staff in June, extending the current sequence of net job creation in Scotland to seven months. Furthermore, the rate of increase in employment was the fastest since April 2012.
June’s marked growth of new business inflows contributed a rise in backlogs of work at Scottish firms – the first such increase in 22 months. Moreover, the rate of accumulation was solid, and the sharpest in over six years.
Latest data pointed to a slight uptick in the rate of input price inflation facing businesses in Scotland, up from an 11-month low in May. Firms north of the border recorded a faster increase in cost burdens than at the UK level, and reported paying more for food, fuel, staff and utilities than in May. Output prices in Scotland on the other hand rose at a slower pace – the weakest since March. Helping ease overall charge inflation was a near-stagnation in factory gate prices.
Donald MacRae, Chief Economist at Bank of Scotland, said: “June's PMI rose to the highest level since May 2007, signalling a sharp acceleration in growth of the private sector of the Scottish economy in the month. Both the services and manufacturing sectors recorded rising activity and output, accompanied by growth in employment. This growth spurt is domestic based with new export orders out with the UK falling for the second successive month. Nevertheless, these results provide more welcome evidence of the growing strength of the recovery in the Scottish economy.”